However, it's a sad reality that many spend so much time focusing on their business that they never get around to accumulating the wealth they deserve.

Today I am going to share with you two simple concepts that I spoke about at a recent conference for small businesses. There's nothing difficult about them, but the effects can be huge over time.

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The first is the power of boosting your bottom line by increasing sales without a commensurate increase in expenses. I used the metaphor of the coffee shop. The coffee they sell pays the wages and the rent, but it's the raisin toast and cake that provide the profit.

Case study: A business has annual sales of $300,000, variable costs of $90,000 and fixed costs of $70,000. This leaves a net profit of $140,000. If they increased sales by 20 per cent to $360,000, variable costs to $108,000, and fixed costs stayed at $70,000, profit would jump to $182,000. A 20 per cent increase in sales improves the bottom line by 30 per cent.

There are two ways to increase sales: increase the number of customers, or ethically increase the amount of goods or services your existing customers buy. Either or both of these strategies should not be too hard, if given some thought.

The second concept is putting a regular investment in place, because that is the only sure path to wealth. Human nature being what it is, most people - even with the best intentions - never get around to investing. In the blink of an eye, five years have passed, and they still haven't started.

The way around this is to make your investment happen automatically, and the easiest way to do that is by direct debit. My strong recommendation is to set up a debit from your business account to your superannuation of $2000 every month. It will be tax-deductible, just like hiring a casual worker, so you'll be reducing your tax at the same time as you are increasing your wealth.

That's got your investment plan on the road, now what you need to understand is that compound interest is slow to work its magic.

Case study: Let's assume you are aged 40 and have $150,000 in superannuation. A tax-deductible contribution of $20,400 a year (which is your $2000 a month, less 15 per cent contributions tax) will boost your superannuation balance to $619,000 by the time you are 50.

That's very nice, but the money grows faster and faster as time passes. On your 55th birthday it will be $1 million, by age 60 $1.6 million, and at age 65 it would be $2.5 million. The cream on the cake is that as a small business owner you may wish to reduce your hours, but continue working until age 70, keeping up your $2000 a month contribution. You could then celebrate your 70th birthday with just on $4 million in your super fund. Notice the miracle of compound interest at work. Your superannuation has made you a tax-free $1.5 million between age 65 and 70. It's most unlikely you could have made that much money from your own efforts.

It's great to have the freedom and flexibility of being your own boss - but there may well come a time when you would rather spend your days somewhere other than the workplace. It takes just $2000 a month starting from now to make those dreams come true.

Question

Any idea when the new income limits for the Commonwealth Seniors Health Card will be legislated?

Answer

At July 1, 2022 the income limits were $$57,761 per annum for a single and $92,416 per annum combined for a couple. The income used is Adjusted Taxable Income (ATI) plus deemed income from your superannuation. There is no assets test.

During the May 2022 election both parties promised to increase these numbers to $90,000 and $144,000 but nothing has happened to my knowledge since. I guess we need to wait for the amending legislation to be presented to Parliament and then passed.

Question

I am 68 and retired and have not made any personal superannuation contributions for at least three years. Hoping to use the catch-up contributions to make a big contribution and claim a tax deduction in this financial year. Am I eligible to make the catch-up contributions.

Answer

To be eligible to make catchup contributions your superannuation balance at 30 June 2022 must be under $500,000, and given you over 67 you must be able to pass the work test to make concessional contributions. I suggest you talk to your advisor.

Question

We are in our 40s, own our home outright - valued at $1.75 million, and my wife owns two investment properties outright, worth $1.2 million in total. My wife earns $70,000 working part time and makes the maximum salary sacrifice to super. I earn $200,000 and do the same. We aim to retire in 15 years.

We have a total of $750,000 in separate, high growth super funds, and have considered starting a SMSF. There is $200,000 in the bank which is earmarked for renovations, plus $40,000 in shares. We have two kids who will eventually go to a private high school. What would you recommend to help grow our funds without putting our nest egg at risk?

Answer

You are doing extremely well with an asset base that is far in excess of what most people have, and which is spread across residential property and shares to provide the necessary diversification. I think at this stage in your life you should be talking to a good adviser because you need to address such issues as life insurance, income replacement insurance, and estate planning.

If you continue salary sacrificing to the maximum, and continue with your present strategy of diversification, you should be extremely well placed for retirement. You need to think carefully about why you would wish to start your own self managed fund. There are many factors to consider and based on what you have achieved to date I can't see why you would need one.