September 12, 2017
Like everybody else, company directors need to plan for their retirement, often through contributions made into a superannuation fund.
As a business makes their contribution to superannuation on behalf of one of their employees, that contribution becomes a deductible expense of the corporation.
This can also be true of a company owner or director in circumstances where they would qualify as an employee of their own business.
In order for this to be true, the company needs to operate as a separate legal entity. Most often this is a company operating as an independent entity or a trustee of a trust.
In this situation, the company becomes the employer and everybody, including those who own the company, become employees.
What this means is that those contributions that are made on behalf of company owners (directors, etc.) can also be considered tax deductible expenses of the company.
Companies can also borrow money in order to pay any of its legitimate expenses. Those expenses can also include superannuation contributions that might otherwise be unaffordable.
Provided that the finances are properly administered, then, like other company debt, the interest may be tax-deductible.
If the business is successful, then it’s worth investigating to see whether the cost of the interest on the debt can be reduced by the marginal tax rate .
Not only that but the contributions made to superannuation may also reduce the businesses profit which in turn may reduce the amount of tax payable.
Beyond that, here are some further things to keep in mind if you are a company director.
Keep an eye on your superannuation funds and ocnsiderpdating your investment options if needed.
Sometimes, you may notice that the scheme you invested in may not continue to prosper.
Under such circumstances, withdrawing your funds and investing them in a more beneficial plan is one of several options to explore..
This practice helps you avoid losing your precious earnings. You may be able to increase your funds by more than 60% just by keeping track of market trends.
No matter how many of your friends are investing in a scheme, avoid it if you consider it risky.
Young Company Directors may also find some advantage in participating in the Government’s First Home Super Saver Scheme1. Housing affordability was one of the key platforms of the federal budget this year.
One of the measures taken to improve housing affordability was the introduction of the First Home Super Saver Scheme (FHSSS) which will allow people to use their super as leverage for their home deposit.
Some people prefer to keep multiple accounts in their name. It increases the management fee required for each account.
However you may want to consider combining all your funds in a single bank account So that you reduce the amount you are paying in account management fees
Moreover, you can save the time required to keep track of all accounts.
The earlier you start planning for and investing in superannuation, the more you can save for old age.
You may find it difficult to take out some amount from your earnings every month, but it can save you from trouble. Set targets and try to achieve them within time.
The more thought and planning you put into your current investment, the more you are likely to benefit in retirement.
This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice and consider a Product Disclosure Statement.