An employee who has a superannuation fund can put that money to work for them once they’ve retired from the company where they had the fund. Additionally, businesses offering superannuation solutions can actually see collateral expansion as well for a variety of reasons.
You can consider this in-depth guide to superannuation to get your head around the particulars. In a nutshell, the Australian superannuation method is similar to the American 401(k) fund. The details differ, but it basically works like this: a certain percentage of every employee payment is deposited into a fund either run by the business or chosen by the employee.
So, as an illustration, if you had a 9% superannuation deposit per paycheck as an employee, then $90 out of every $1,000 would go to the fund. At $3k a month, that’s $270. In a year, that comes to $3,240. In thirty years, $97,200 have been saved excluding interest and what may or may not be taxable (depending on localized laws or procedures), as well as possible wage increase over that time.
Now if you’re a small business with fifty employees, the total sum comes to $4,860,000 in thirty years at the same deposit rate, external interest/tax/wage increase excluded. A fund like that can be used as investment capital on the stock market, increasing the shares of everyone if properly traded.
The Big Business Angle
It’s unlikely you’ll have 50 employees cash out simultaneously. A business grows with time. A small operation that starts with two employees can have as many as ten in a few years’ time. Over fifty years, it’s likely that baseline staff will expand on a predictable curve. If you’re onboarding more employees than you let go, your superannuation fund should always be expanding. Even when you have to pay out, there is still a substantial amount of capital there.
Naturally you’ll want to encourage employees to invest in the fund your business controls, but allow some not to if that’s not something they’re interested in. This will be a reputable tactic which should give your business greater positive standing in the community.
A business that offers employees the choice of a superannuation fund is desirable over one who offers no choice in the matter. Superannuation itself is to a degree compulsory in Australia. When employees have investment autonomy, that is apt to increase their satisfaction with your company, helping you draw more effective talent over time.
So, superannuation can be used as a means of financial leverage in terms of company assets through effective trading and associated interest. Additionally, it can give your business better reputation in the community you’re a part of, helping you acquire more talented, effective employees. Together, these factors will help your business expand financially and reputationally over time.
The Small Business Angle
If you’re looking at superannuation from the perspective of someone who has such a fund in their name, savvy financing will additionally allow you to expand personal business ventures. Here’s a brief examination of a couple who leveraged three superannuation funds with personal savings into an SMSF, or Self-Managed Superannuation Fund.
Through careful investment and loan management in conjunction with their SMSF, they were able to move a small business from their home and a storage unit to more professional premises without losing a financial cushion.
Personal contributions of a tax-deductible kind could be used with their SMSF, and between all these things they were able to obtain a loan for the necessary larger property, allowing them to purchase it, expand business, and work toward an equitable outcome with an “eject button” in terms of property sale should such a thing become necessary.
Overall Implications
What all this boils down to is this concept: superannuation represents usable capital either in terms of large-scale investment, or in terms of personal use. Be creative, think outside the box, and seek means by which you can use such resources to your advantage in the most effective way.
