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About 2.5 million Australians are now employed on a casual basis, according to The Australian Bureau of Statistics. That’s more than a quarter of the workforce. And the gig economy – like it or not – is growing fast.
Changing work landscape
The gig economy has come about in part, to meet the changing labour needs of big organisations who want a more flexible workforce. Digital transformation has led to remote working and the rise of digital nomads, plus tech platforms like Uber or Airtasker, have created the sharing economy. Put all that together and it’s clear that the Australian work landscape looks very different than a decade ago.
The danger for super
What this means, is that an increasing amount of the workforce now works outside traditional, permanent, employment roles. This has many positives, including mobility and flexibility for workers, but it also means there’s a huge swathe of the workforce that don’t qualify or receive super in their arrangements. And the danger is, that a whole generation of giggers, as they’re called, will end up with very little put aside for their retirement.
So, what do you do if you’re working in the gig economy and want to build up a super nest egg?
Super is generally a tax-advantaged investment vehicle, which means within limits you can reduce your tax bill. You can make personal super contributions, either before or after tax, and perhaps benefit from the government co-contribution if you are a low or middle-income earner.
You can contribute up to $25,000 yearly in concessional super contributions (those you claim a tax deduction for) and an additional $100,000 a year in non-concessional super contributions (those you don’t claim a tax deduction for).
Four ways to boost your super in the gig economy
- Consider your business structure as a freelancer. If you set up as a company (Pty Ltd) you are required by law to pay yourself super if you are paying yourself a wage, which is one way of ensuring discipline around getting super.
- Set up a direct debit if you receive regular income, from your bank account into your super fund, as a salary sacrifice. If your income is irregular, you could wait until say June before you commit anything to super. Approximate your income on either an annual, quarterly or monthly basis.
- Keep track of any multiple super accounts and combine them as quickly as possible, and monitor the fees and charges if you move between employers and jobs. Look at your fund’s investment options and tweak them to get the best possible return based on the level of risk you are comfortable with.
- Contribution splitting can allow both members of a couple to keep their super account balances growing. This may be ideal for women, if they have taken time off from work to raise children and/or start a home-based business. It is as simple as transferring part of the highest income earner’s employer super contributions to the lower earner’s super account each financial year.
Make sure you’re not missing out
Research by Tria Investment Partners for Cbus shows that about 326,000 Australians in the gig economy are not correctly receiving their superannuation guarantee, which is over 3% of the eligible workforce.
Freelancer, or PAYG contractor/employee? Many organisations are usually happy to put you on their payroll. In this case you benefit from earning some super, but it doesn’t stop you from taking on other freelancing jobs which can have a less formal arrangement. If you are paid for the hours you are working, you are an employee, whereas if you are paid to achieve a specific result in a certain timeframe, you are an independent contractor or freelancer.
Generally, an employer must pay 9.5% of your salary into your super fund if you’re 18 years old or over, and you earn $450 or more before tax in a month. This applies to full time, part-time and casual employees who are Australian residents or hold a working visa – including those working in the gig economy.
Recruitment agencies are (or should be) on top of the super laws so ensure that any arrangement via them has a super component for you. Temp, casual and shift workers are generally eligible for super. If you have doubts or complaints, visit the Fair Work website.
Of course, the ATO has clear guidelines about when and how super needs to be paid for a variety of work arrangements as an employee. Make sure you know your rights and are receiving the correct entitlements. You can check that here.
Staying on top of your working arrangements will mean a better chance to grow your super for your later years.