Retirement crisis coming for millions of small business owners
A retirement crisis hiding in plain sight could be coming for millions of Australians, with new research revealing a worrying lack of superannuation contributions among the country's smallest business owners.
In a national survey of small business operators, most of whom ran businesses with four employees or fewer, AMP Bank found 55 per cent of respondents contributed "regularly" to their own super.
That means close to half of the owners in that sector do not, opting to prioritise reinvesting in their business or managing cash flow.
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Almost half of Australia's small business owners don't contribute to their super regularly, according to new research. Getty Images/iStockphoto
By contrast, about 90 per cent of the Australian workforce receives guaranteed superannuation, now increased to 12 per cent.
Super contributions are not compulsory for the self-employed, and sole traders make up the majority of Australian business owners.
But the neglect of super contributions is fuelling a growing retirement savings gap.
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AMP's modelling showed that even $100 of super per week from age 30, assuming a 6 per cent annual return, would amount to more than $500,000 by age 65.
"It's understandable that many small business owners prioritise reinvesting in their business, which can mean super contributions fall by the wayside," AMP Bank GO director John Arnott said.
"In the early stages, cash flow is often tight – paying a wage, let alone contributing regularly to super, can be a real challenge."
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However, he urged small business owners and sole traders to "strike the right balance" between short-term and long-term goals, and to make use of tools available to streamline the process.
"Time is precious, and the admin and mental load are very real. Resources like the ATO's website and your banking app can help automate processes, and provide valuable cash flow insights, visibility, and control," he said.
"And importantly, understand how to make the most of the super system.
"It offers significant tax advantages for long-term investing, and even small, regular contributions can grow substantially over time thanks to the power of compounding."
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