Australia's business owners income-poor but asset-rich

Australia's small business owners are getting richer and smarter with their money - although they still don't earn as much as the typical wage or salary earner, a new study has found.

University of Western Sydney Deputy Vice-Chancellor (Research and Development) Professor Scott Holmes and Dr Mark Sargent from Newcastle University have been examining the level of business owner wealth using data collected by HILDA and the Australian Bureau of Statistics over the last ten years.

There are more than 2.1million owner-operators of small or micro-sized businesses in Australia.

The researchers found business owners are income-short but asset-rich.

"When you examine the income and assets of households where the main activity is running your own unincorporated businesses, and compare it to the homes of paid employees, some interesting patterns emerge," says Professor Holmes.

"Business owner houses report a lower level of weekly income - in 2010, they took home an average weekly income of $1,975, compared to a wage earners $2,173."

"However, they more than made up for this in assets. The typical small business household has assets of over a million dollars ($1,095,000 in 2010), whereas wage earners have only about two-thirds of this ($673,000)."

Dr Sargent says business owners are getting smarter about how they build this wealth.

"There is an old saying in the business community that my business is my superannuation, but this no longer seems to be the case for many Australian entrepreneurs,"  says Dr Sargent.

"Putting all your eggs into-the-one basket has always been a highly risky strategy, since business selling prices can fluctuate widely and any business venture is often highly exposed to legal claims and liabilities."

"What we have now begun to detect is that more and more business people are actually instead dramatically building up their superannuation funds. This is a far more protected and secure environment for wealth creation,"

In 2003, superannuation assets in business owner households was quite low, but by 2010 it had almost caught up to the average policy fund of a salary earner.

"Super was once the preserve of employees and government bureaucrats."  

"Today it's an equal opportunity vehicle for wealth creation. It seems that policy to encourage Australians to plan for their own retirement is working very well indeed amongst the small business sector," says Dr Sargent.