Strategies for boosting your super in the gig economy

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Why it matters for your retirement
Do I qualify for employer super contributions?
What can I do about my retirement?
12 tips to help boost your super if you’re a gig worker or contractor

Working in the so-called gig economy through tech apps and platforms is no longer unusual, with 1 million Aussies (or 7.8% of all employees) working as independent contractors, according to the latest Australian Bureau of Statistics data.

In December 2021, around 19% of all employees (around 2.4 million) were also classified by the ABS as working as casual employees.

That’s a big change from the traditional model of permanent employment and it has major implications for how much you will end up with in your retirement nest egg and your standard of living when you finally get to put your feet up.

Why it matters for your retirement

When our super system was first established, most working Australians were employed in full-time permanent roles. The amount employers contributed to their employees was based on this model and it remains the dominant idea behind most of the policy decisions still being made about super.

Although the increasing casualisation of the workforce and the development of the gig economy have given many employees more flexibility and mobility – which can be great – it also means you don’t necessarily qualify for regular employer contributions to your super account if you work on a task or contract basis.

That’s a big deal, as the majority of contributions going into most employees’ super accounts are superannuation guarantee (SG) contributions made by their employer. If you don’t have an employer making regular contributions for you, your super balance is going to look pretty sick.

Part-time low-income employees who work for multiple employers and don’t meet the SG threshold (currently $450 per month) also miss out on having contributions made on their behalf.

Need to know: Changes to $450 per month threshold

Until 30 June 2022, employers are not required to make super contributions for employees who are paid less than $450 per calendar month (before tax) in salary or wages. (Salary or wages includes any overtime.)

All this changes on 1 July 2022, when employees under this threshold become entitled to SG payments regardless of how much they are paid.

According to the Association of Superannuation Funds of Australia (ASFA), around 300,000 people – mostly women – will benefit from the scrapping of the threshold. This includes casual and part-time workers and some of those working in the gig economy. Younger workers and those working in multiple jobs paying less than $450 a month will likely benefit most from the reform.

Do I qualify for employer super contributions?

The ATO classifies gig workers as being self-employed if they are paid ‘per job’ and are not part of a business’s normal payroll. This means you generally won’t qualify for employer super contributions, as the income you make from these jobs is viewed as being paid to a sole trader, rather than an employee.

There is a growing push for gig workers to be classed as employees and to receive similar benefits to those paid to other employees (such as super contributions and sick leave), so this situation may change in the future.

Under the ATO rules, if you’re self-employed as a sole trader or in a partnership, you are not required to pay SG contributions into a super fund for yourself.

It’s important to note that you could still be eligible for SG contributions if you’re deemed a contractor by the ATO or work casually for an employer. It all depends on your particular work situation.

An employer is required to pay super for a contractor if you are mainly paid for your labour and you are paid $450 or more (before tax) in a calendar month. (This threshold only applies until 1 July 2022 – see box above). In this situation, your employer must make SG contributions even if you hold an Australian Business Number (ABN).

You can use the ATO’s Superannuation guarantee super eligibility decision tool to check if your employer is required to pay super for you.

Find out whether you are a contractor or employee.

Good to know: Employee or contractor?

Whether gig economy workers are employees or contractors is a hot topic in employment law at the moment.

In 2019, the Fair Work Commission decided Foodora delivery drivers who had previously been paid as contractors were actually employees. This meant they were entitled to super contributions paid on their behalf. Although some former Foodora riders received their super payments prior to the company’s exit from Australia, others were allegedly left owed significant back pay and super contributions.

Unfortunately, two recent High Court decisions have failed to clarify the position of gig workers and their entitlement to super contributions.

In one case the court ruled in favour of a lighting company that argued it had engaged two truck drivers as contractors. In the other case, however, the court ruled a backpacker working for a labour-hire company was an employee, despite signing an employment agreement that described him as a self-employed contractor.

What can I do about my retirement?

If you’re working in the gig economy and nobody is making super contributions on your behalf, you need to spend some time thinking about your retirement.

Most gig workers, contractors and freelancers are under no legal obligation to pay themselves super, but that doesn’t mean it’s not a good idea. Most people spend two to three decades in retirement and while some people are happy relying on the Age Pension, it’s a lifestyle that’s not for everyone.

If you want something more, you will need to take charge of your super and start building your super nest egg.

It’s also important to recognise there are some significant tax advantages to investing through the super system, including opportunities to cut your tax bill. You can also make personal super contributions and the government may kick in some extra money if you’re a low or middle-income earner.

12 tips to help boost your super if you’re a gig worker or contractor

Review your business structure – If you operate as a company – rather than as a sole trader or partnership – you are required by law to make super contributions on your own behalf when you pay your wage. This can be a great way to discipline yourself into making regular contributions to your super savings.
Consider setting up a salary-sacrifice arrangement – When you operate as a company, you can establish a salary-sacrifice arrangement that makes contributions into your super from your before-tax income – potentially cutting your tax bill. Learn about salary-sacrifice arrangements.
Find and combine all your super accounts – Check if you have multiple super accounts and consider combining them into a single account. If you have multiple accounts from several past employers, you are being charged multiple fees and charges. Learn about consolidating your super accounts.
Check out membership of several industry funds – Many of these welcome gig workers and low-income casual employees as members.
Make contributions even if your gig work is temporary – Regular voluntary contributions – even between salaried jobs – can make a big difference to your future retirement.
Consider some tax-deductible contributions – As a self-employed worker, you can make contributions into your super whenever it suits you – whether small and frequent or large and one-off. You can contribute up to $27,500 a year in concessional (before-tax) contributions into your super account each financial year and claim a deduction in your tax return. Learn about tax-deductible contributions.
Check out the government co-contribution – Workers earning under $57,016 in 2022–23 can make a personal contribution into their super account and potentially qualify for up to $500 in matching super contributions from the government. Learn about co-contributions.
Split contributions with your spouse – Contribution splitting can help both members of a couple keep their super accounts growing, even if one of you is a gig worker and on a low income. This can be as simple as transferring some of the highest income earners super contributions into their partner’s super account each year. Learn about contribution splitting.
Review your investment option – Take a look at how your super account is invested and think about whether it suits your retirement goals and your risk profile. Tweaking your investment option – perhaps selecting a higher risk category in your early working life – may help boost your super balance in future years. Learn about switching investment options.
Make non-concessional (after-tax) contributions – As a gig worker, like anyone else, you can contribute up to $110,000 a year in voluntary personal super contributions to help boost your super savings. Learn about non-concessional contributions.
Consider a carry-forward contribution – Gig workers often have earnings that fluctuate significantly from one year to the next. If you haven’t contributed much to your super in recent years but you have a big jump in income this year, you may be eligible to make some catch-up concessional contributions. Learn about carry-forward contributions.
Check you’re being paid by your employer – Contractors who are paid through their employer’s payroll should be receiving compulsory super payments. So it’s important to regularly check you are being paid what you’re owed. You can check through the myGov app connected to the ATO. Learn ways myGov can help track your super.