Financial considerations for the self-employed

Running your own business can be extremely rewarding. Being your own boss and knowing that all the effort you put in goes towards your success… for many people this is a dream come true.

But, how would you manage if something happened and you couldn’t work for a few months?

Have you considered your future? Do you have a solid financial plan for your retirement?

And what would happen if there was a significant change in your personal life… would you and your assets be protected?

There are some important financial considerations for small business owners and the self-employed that we believe should be thoughtfully addressed.

Superannuation and investing

Superannuation and investing

If you are self-employed then the superannuation buck stops with you. Worryingly, almost 25% of small business owners in Australia had no superannuation at all in 2012, according to research conducted by the Australian Super Funds Association (ASFA). There’s nobody else responsible for your superannuation contributions, so it is imperative that you allocate the appropriate amount of funds to secure your financial future.

While you may be able to sell your business and utilise those funds to support your retirement, there’s no guarantee that the timing of the sale will suit your plans… and there’s definitely no guarantee on the amount you will be paid.

The benefit of making regular contributions to your superannuation is twofold. First, you can be confident that you are building your own financial security and working towards your retirement goals.

Plus, your contributions are taxed at a significantly lower rate compared to your personal income and your business may be able to claim a tax deduction on the contributions… which can make for a very effective overall tax strategy. Just be mindful of staying below the contribution caps so that you don’t incur any tax penalties.

In addition to your superannuation, developing a diverse investment portfolio can also help build your wealth and create a nest egg that is not directly linked to your business.

A financial adviser can help review your financial situation, determine your long-term needs and build a portfolio that works towards your goals.

Tax effective structures

Tax effective structures

The structure of your business can have a dramatic impact on the tax you currently pay, and your obligations, should you choose to sell.

If the structure of the business is not correctly established, you could already be paying too much tax and you may also be liable for capital gains tax at the time of sale.

Seeking advice about the most appropriate structure for your business can help clarify these requirements.



It can be daunting to think about what could happen if you were unable to work due to illness or injury. As a self-employed individual, it’s unlikely that you will have the benefit of sick leave. Without some form of protection, your financial situation could be dramatically impacted in a short space of time.

This is where insurance can help. There are many types of insurance available, but income protection and business expense cover are important to consider for the self-employed. Income protection will pay you a portion of your income while business expense cover will pay for many of the business’s fixed costs while you’re unable to work.

Having this safety net can relieve the stress associated with bills and other expenses so that you can focus on your recovery.

Insurance premiums are often tax-deductible for you and your business, and you will find there are many different providers, including through your superannuation fund.

Estate planning

Estate planning

Discussing the inevitable is rarely high on the to-do list, but it is important that you have a solid plan for your estate.

Making sure your will is up to date and covers the tax-effective distribution of your assets minimises the possibility of confusion.

If your business is a partnership or you have equity in a business, a buy/sell agreement should also be in place. This can protect the business if a key person or partner was to die.

Individual advice

Every small business owner will have their own set of needs. At First Financial, our team of advisers can help develop a strategy that will support your specific circumstances. Contact us today to find out how we can partner with you. Read more Financial Planning articles.

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