The rise of the shared economy is leaving a big dint in super balances, reports Sylvia Pennington.
- On average, self-employed people retire with about half the super of employees.
- One problem is that gig workers manage their own tax and super obligations.
- Many contribute little or no super at all.
- Not paying attention to super could compromise their standard of living in retirement.
The gig economy gears up
Gig economy jobs are short-term or casual engagements, typically arranged online, for which individuals are paid as independent contractors, not employees.
Gig workers manage their own tax and superannuation – take Diz Jangra, for example, a Melbourne father-of-one who makes a living from casual and short-term assignments.
This mode of working has become commonplace in recent times, with platforms such as Uber, Deliveroo and Airtasker providing opportunities to earn a side or full-time income.
Casual labour now comprises a fifth of Australia’s workforce, according to research by McCrindle and Care Support Network.
While many people in this space neglect their superannuation payments, Jangra is swimming against the tide, contributing 10 per cent of his irregular earnings to super, come what may.
The 37-year-old (pictured below) immigrated to Australia from India in 2004 and has worked as a painter for 13 years. He began earning extra money via the Airtasker odd jobs marketplace in October 2016 and five months later quit his permanent job to try his luck as a dedicated gig worker.
The benefits of becoming a flexible worker
Jangra’s strategy of focusing on painting gigs, rather than putting in a bid for any and every odd job on offer, has served him well. He’s clocked up more than 180 tasks and generated billings of more than $170,000 via Airtasker since 1 December 2015.
Airtasker charges workers a 15 per cent commission on completed tasks.
“The smallest jobs I did, a couple of times, were worth only $10,” Jangra says. “Someone in my suburb wanted to paint their house and needed suggestions for ceiling and wall colours and I put in a bid so I could post a completed task and get a good review.
“The amount I make now varies. Some weeks it might be $500 and other weeks I might finish three jobs worth $2000 each but on average it would be around $2500 a week.”
Jangra typically works on more than one task simultaneously and begins bidding for new tasks as his current ones near conclusion.
“My target is to work at least 40 hours a week but I can be busy six or seven days a week if extra time is needed,” he says.
He finds the autonomy and flexibility the gig model offers attractive.
“If you’re working for someone else, it’s usually for fixed hours, like 7am to 3pm every day, but with Airtasker there are no time boundaries,” Jangra says.
“As long as you and the person posting the job are agreeable, you can start and finish whenever you want.”
Fast and secure payment is an added bonus.
“If you pick up a job on Airtasker, the poster’s money is deposited immediately and once you’ve finished their task you can request to receive it straightaway,” Jangra says.
“If I do a $500 job, I know there will be $425 coming into my account with 72 hours – there’s no debts or waiting around to be paid.”
Super struggles for the self-employed
In addition to putting money aside for income and goods and services taxes, Jangra transfers 10 per cent of his gross earnings into his super account each fortnight.
“Before, when I was working for someone else full-time, my employer paid it for me but when I started working full-time for myself on Airtasker, I started paying it myself,” Jangra says.
“If I make $1500, I pay $150; if I make $2000, I pay $200. I’m very strict with myself and try not to miss a payment. If I do, I put in extra the next week to make it up.
“I know I don’t have to, but at least this way you get some savings. That’s what’s in my mind, to save something, because everyone needs some super for their future.”
Contributing to their super is something self-employed Australians have struggled to do, historically.
According to a September 2017 discussion paper by The Association of Superannuation Funds of Australia, the rise of the gig economy strengthens the case for extending compulsory super to include the self-employed.
Extrapolating data from the Australian Taxation Office, the association’s research showed:
- only about a quarter of self-employed people made tax-deductible contributions to their super accounts in 2014-15
- while the self-employed accounts for 10 per cent of the workforce they only accounted for 4 per cent of total superannuation contributions in 2014-15
- self-employed workers aged 60 to 64 have around half the super of employees
- in 2013-14 the average super account balance for self-employed males was around $155,000, compared with $386,510 for male wage and salary earners
- for women the difference is just as stark: $86,000 versus $159,000.
Flexible workers and super
There’s lots to like about gig work, but doing it over the long-term could set your retirement plans back if you’re not disciplined enough to save under your own steam, according to ANZ financial adviser Daniel Thompson.
Changing your mindset can be as much of a challenge as finding a few dollars to pop in the retirement pot for those not covered by compulsory contributions.
“People will usually spend what they make first, save anything left over and think about investing later,” Thompson says.
“They should flip that around and use a percentage of their income for investing and saving and then spend the rest. That way, even if income is highly irregular, you’re putting something away – whether it’s inside or outside super.
“Ideally, you’d look at investing 10 per cent and saving 10 per cent but it’s better to start off low and build up than think you’ll do it later when you’re earning more, or have a more regular income.”
Even if retirement is decades off, it pays to take a long view, says Jangra.
“It’s too early for me to think about not working – I have at least another 20 years to go until I retire, but of course I want to have some savings when I do. In my opinion, we all should be paying into super – it’s good for you, good for your family, good for everyone.”
To make a concessional (before-tax) contribution, speak to your employer about salary-sacrifice.
For non-concessional (after-tax) contributions or personal contributions (on which you intend to claim a tax deduction - you must notify the fund), ANZ Smart Choice Super customers can make a contribution via BPAY.
Biller Code – 169060
Reference Code – member number (this is a combination of your ANZ Smart Choice Super BSB and account number.)