Is your business your super?

Extreme low angle shot looking up to multiple skyscrapers in the city

Many self-employed people view the sale of their business as their retirement fund – their superannuation. So just like ensuring that superannuation investments are being well managed, business owners need to plan ahead to ensure their business can continue to provide a reliable income after they retire.

One of our new clients, Dale,* is a typical example of this expectation – he is an accountant working from his custom-built office attached to his house. He wants to retire in a few years, and has always assumed that he can sell his business and retire on the proceeds. Although he advises his clients to plan ahead, amazingly he has failed to follow his own advice and has never documented a succession plan.

The value of a business

Dale understands the value of the loyal client list he has built up over 20 years. Those clients will continue to require the same standard of accounting advice in the future and if so, their fees will provide an ongoing income stream to the business which services those needs. If Dale can transfer his clients’ loyalty to another accountant, then it represents an asset he can sell.

To plan his succession, Dale could explore a few options. He could employ a junior accountant to up-skill with a view to having him or her buy his business, or he might be able to sell the business to an established accounting firm. This would allow him and continue to work with his clients as he transfers their loyalty to the new owner.

What about tax?

Any sale proceeds Dale receives will be treated as a capital gain, which would normally be subject to tax. However, a number of concessions are available to small business owners, particularly when it comes to retirement. These concessions are designed to reduce or eliminate any capital gains tax (CGT) payable on the proceeds of the sale of the business.

Relinquishing control can bring rewards

Business succession confronts many small business operators, and it’s not a case of one size fits all. The specifics of the succession plan will vary from business to business, and it may present a significant challenge for independently-minded owners. After all, it means progressively giving up control and letting go of the day-to-day running of a business that they have personally established, grown, and maintained.  It is sometimes a good idea to engage a business consultant to help design and guide your succession strategy.

Will your business fund your retirement?

For many people, converting a business into an asset which can be sold for a six or seven-figure sum could be the most profitable use of their time between now and their ultimate retirement.

If you are a small business owner, ask yourself  ‘what does your retirement fund look like?’ If you don’t have an answer, talk to us sooner rather than later. Then you can get back to running your business knowing your ‘superannuation’ is being well managed.

*Name changed for privacy purposes.


Bottrell Wealth
Bottrell Wealth are expert financial planners, with a vast array of experience with businesses of all shapes and sizes. Our knowledge extends past financial planning into, accounting, taxation, marketing and recruitment. With over 20 years dealing with businesses and individuals, Bottrell Wealth can help you reach your goals!

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