Retirement Planning for Business Owners

For a business owner, retirement planning can be significantly more complex than simply choosing a date to finish work.

Your business may represent a large part of your wealth, income and identity. Turning that asset into reliable retirement income requires careful planning.

Don't assume your business is your retirement plan

Many owners expect the eventual sale of their business to fund retirement.

But the price you receive can depend on profitability, systems, customer concentration, management, industry conditions and whether the business can operate without you.

Planning several years before a sale can provide time to improve the business and reduce your reliance on one outcome.

Understand your retirement number

Work out how much income you want after leaving the business and what assets will provide it.

Consider your:

super + business sale proceeds + property + investments + cash

and compare these with your expected retirement spending.

This helps establish how much value you actually need to extract from the business.

Consider small business CGT concessions

Eligible Australian business owners may have access to valuable small business CGT concessions when selling qualifying business assets.

These can include the 15-year exemption, 50% active asset reduction, small business retirement exemption and small business rollover. The small business retirement exemption can provide an exemption for qualifying capital gains up to a $500,000 lifetime limit per eligible individual, subject to detailed eligibility rules.

These rules are complex, so tax and financial advice well before a transaction can be important.

Plan the transition, not just the sale

Retirement planning for business owners should consider succession, tax, super contributions, investment of sale proceeds, estate planning and the income required after the business stops paying you.

Ideally, your business exit strategy and retirement strategy should be developed together—not after a buyer is already at the table.

General information only. Small business CGT concessions and superannuation rules are complex. Obtain professional tax and financial advice regarding your circumstances.