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The sorry state of self-employed super

One-in-three self-employed workers has no super. Are you one of them? What are you going to do about it?

Two decades of compulsory super contributions have seen a steady rise in the average wage earner's balance – but how are Australia's significant minority of self-employed workers making out?

Are they stashing their own retirement savings apace – or are non-compulsory super contributions low down the priority list for many?

In her case, something in between, says former flight attendant Clare Maxfield, who has run her own one-woman corporate image consultancy since the collapse of Ansett in 2001.

Aged in her late 40s, Maxfield makes irregular contributions to a self-managed super fund (SMSF) she shares with her partner.

"It's a bit hit and miss, really," Maxfield says.

"It follows the ebb and flow of my business. Depending whether the business is doing well or not, I'll add the minimum." While retirement is not yet imminent, worries about whether her provisions are adequate arise regularly, Maxfield admits.


"It sits there – an annoyance at the back of my mind," she says.

"There's the fear I won't have enough when I finish. I think about it a lot." Maxfield's concerns are in common with many other Australians who call themselves boss.

There were 754,000 self-employed individuals and 9.26 million employees in Australia in 2009-10, according to ABS figures cited in the Association of Super Funds of Australia's (ASFA) 2012 Equity and Super report.

Self employment is most common in the primary production, construction, property and business services, retail and transport sectors.

Twenty-nine per cent of self-employed workers had no super, compared with 13 per cent of wage and salary earners, the report found. A preponderance of those without super were men working in the construction and transport sectors.

High balances among the self-employed are also uncommon. Just 18 per cent of self employed workers had a balance of $100K or more in the run-up to retirement, compared with 42 per cent of wage and salary earners.

Chris Kirkwood, a partner with mid-tier accounting firm ESV Chartered Accountants in Sydney, says it's a tale of two parts.

Many of his firm's self-employed clients are residents of Sydney's wealthy eastern suburbs. Financially sophisticated and investment savvy, they don't need to be reminded to save for the future.

Typically, they're au fait with the tax breaks offered by the system and are stashing away the maximum in SMSFs, Kirkwood says.

But while some silvertails may be sitting pretty, it's a less rosy picture at the other end of the spectrum, according to ASFA chief executive Pauline Vamos.

"There's a significant portion of people who aren't going to have enough money in retirement," Vamos says.

Many taxi drivers and tradies have nothing put away and no businesses to sell when they reach retirement age. Unless exceptionally fit, they're unlikely to have the option of supporting themselves by staying on the tools into their 70s.

By contrast, some white-collar workers who can't afford to retire can continue to work, well beyond 65.

The growing trend for older workers to become independent contractors has also meant increased "leakage" from the compulsory system and a growing pool of potentially under-funded people, Vamos says.

ASFA takes the position that independent contractors should be treated the same way as the salaried masses but its push for reform has failed to gain traction politically.

"ASFA has been saying for quite some time that the self-employed should be part of the compulsory super system," Vamos says.

"Because it's never been a significant part of the way people are employed, it's never been worth a discussion in Canberra." Technological advances, including recent moves to provide the ATO with access to super details, meant it would be feasible to implement a compulsory scheme for self-employed workers, Vamos says.

Universal coverage is key to ensuring the system is sustainable, she argues.

"One of the keys to a successful system is that everyone's part of it . . . The gaps in the system are just as important as the caps and the tax concessions."