If you’re a gig worker, you’re probably thinking more about where your next job will come from than about your super.
There has been a generational shift in workplace patterns, with younger workers in particular abandoning the traditional ‘9 to 5’ workplace model and opting for the flexibility and freedom that comes with working as an independent contractor or freelancer.
The ‘gig economy’ refers to working independently on a task-by-task basis. In the gig economy, workers are matched with customers via web-based platforms (such as Uber, Airtasker and Freelancer, to name a few) to provide goods or services.
It’s a growing sector, with around 7% of Australians finding work through the gig economy.
What this means for your super
Unfortunately, although gig workers have more independence and flexibility, there are tradeoffs; the main one being a lack of financial stability due to having irregular working hours and gaps between jobs. It’s difficult to plan ahead and budget when work is unpredictable and you don’t receive a regular wage.
Constantly changing hours means that you don’t receive a regular income – or regular super contributions.
As a result, your super is often overlooked, which can have serious consequences at retirement - the worst-case scenario being that you may not have enough saved to live comfortably once you stop working once and for all.
Fact: the self-employed (including gig workers) retire with less in super than wage earners
The ATO classifies gig workers as self-employed or sole traders, which is different to a wage earner whose employer is required to make regular super contributions for them. For the self-employed, super is paid at your discretion – it’s not compulsory, so many gig workers don’t pay themselves super. This can have serious repercussions when retirement comes around.
Recent research conducted by ASFA has found that:
- only 22% of self-employed workers have super; and
- in the run-up to retirement, only 27% of the self-employed aged between 60-64 have more than $100,000 in super (compared to 50% of wage earners).
In other words, self-employed workers have considerably smaller super account balances, and retire with much less super than their wage-earning counterparts.
In other words, working in the gig economy can seriously jeopardise your super savings.
There are incentives to encourage gig workers to contribute to their super
Super receives preferential tax treatment, so it’s worth getting in the habit of paying yourself super. And because the self-employed statistically have less at retirement, it’s important that you do get into the habit of doing so.
Because it’s your responsibility (but not obligation) to pay yourself super, there are some incentives to encourage you to save for retirement.
- anyone up to age 75 can claim an income tax deduction for personal super contributions, subject to the concessional contributions cap of $25,000.
In addition to being able to claim a tax deduction for personal super contributions, you may be eligible for:
- the low-income super tax offset (LISTO) > which may entitle you to receive a government payment of up to $500 each financial year if you earn $37,000 or less per year
- for the super co-contribution > which sees the government put in 50 cents for every dollar you put into your super (up to a total of $500 per year).
And it’s in your own interest to do so, because (let’s face it) no one else will pay it for you.
Some tips for gig workers
Every paycheque you receive, arrange to have 9.5% of that money put into your super
Start a ‘rainy day’ savings account if you haven’t already to help you plan for unforeseen expenses or to tide you over between jobs
Create a budget - write down everything you spend money on so that you can keep track of your finances and spending (according to a study by UBank, a staggering 86% of Australians don’t know how much money they are spending each month).
The information on this page has been issued by Maritime Financial Services Pty Limited (MFS). It contains general information that doesn’t take into account your individual objectives, financial situation or needs. It’s important to consider how appropriate this general information is in relation to your situation before making an investment decision. We recommend that you seek financial advice before making any decisions regarding your super or investments. The information on this page is current at the time of publishing.