Forging a career as a voice-over artist has been a professional dream come true for Sydneysider Neil Lithgow.
After dabbling in the space for years, he quit his role in the financial services sector to offer his services as a master of ceremonies for community nights, trivia nights and awards ceremonies.
He's one of the growing number of Australians working as a freelancer, admitting that relying on the gig economy has seen his hip pocket take a hit.
"Despite [previously] working in the financial services sector and working alongside a number of financial planners, superannuation is the last thing on my mind right now," Lithgow says.
He understands that it takes time to build a business and intends to put money into super down the track when his earnings have increased. "My earnings have decreased significantly, but I'm much happier."
However, with an investment property in Potts Point under his belt, he's luckier than most gig economy workers and freelancers. The property has doubled in value since he purchased it, and the rent covers the mortgage costs.
"The rental property forms the majority of my retirement plan," Lithgow says.
Fellow gig economy worker Russell Berechree works via Airtasker, having completed more than 240 tasks since September last year. He works seven days a week.
The Melburnian accepts work via the platform as a courier, handling assembly work, installs, logistics and difficult furniture removal tasks from apartments and offices across the city.
"I've teamed up with a mate and we've got a high-roof van and we do the jobs no-one else wants to do, like removing large furniture from small apartments around corner stairways," Berechree says.
Contributing to his own superannuation is the last thing on Berechree's mind, and Airtasker isn't responsible for paying it on his behalf. The 38-year-old admits that meeting his tax liabilities is a far more pressing concern right now.
"It's no different to all the years I've done in hospitality, though. I never had any superannuation paid because of sham contracting and dodgy operators," he says.
Both of these gig economy workers are classic examples of the perfect storm brewing in Australia right now.
Those who are self-employed have always been exempt from compulsory superannuation, but the changing nature of employment means there is now a growing number of gig economy workers and freelancers. Most choose not to make voluntary contributions to super and experts predict that the gap is only going to widen as the gig economy grows.
While tax concessions have led to some self-employed saving for retirement through superannuation contributions, average balances have remained relatively low.
In 2013-14, the average superannuation account balance for self-employed males was about $155,000, compared with about $386,000 for male wage and salary earners. For women, the difference is just as stark ($86,000 versus $159,000), according to figures from the Association of Superannuation Funds of Australia (ASFA).
It estimates that there are about 100,000 workers in Australia who use web-based platforms to obtain work on a regular basis, or about 0.8 per cent of the workforce, however these numbers are set to grow as web-based platforms cater for an increasingly wide variety of industries and professions.
The problem is under investigation, with ASFA recently admitting that the case for change is strong. The rise of the gig economy will have potentially profound effects on the nature of work and the relationship between workers and those who engage them, according to ASFA chief executive Dr Martin Fahy.
ASFA recently released a discussion paper on the changing nature of work and the implications of this for Australian workers, including their superannuation.
The discussion paper suggests a couple of options for adjusting current settings. These include:
- Extending coverage of the Superannuation Guarantee to independent contractors and the broader group of self-employed workers.
- Removing the $450-a-month wages threshold for the SG to be paid to employees.
Of particular concern is where workers are engaged under a contract and have work arrangements resembling those of an employee. These so-called "dependent contractors" don't receive the benefits that employees receive.
"In Australia, some platforms with workers who inhabit this legal 'grey area' are showing strong growth in worker numbers. This issue will only become more prevalent," Fahy says.
Sham contracting, where an employer attempts to disguise an employment relationship as an independent contracting arrangement to avoid responsibility for SG contributors is also of concern, Fahy says.
Meanwhile, ride-sharing company Uber came under fire last year for allegedly failing to comply with federal workplace laws amid claims of sham contracting, prompting the Fair Work Ombudsman to launch an investigation following allegations that Uber had underpaid tens of thousands of drivers by classifying them as independent contractors rather than employees.
A different approach
Market research conducted by new industry player gigSuper suggests that 75 per cent of self-employed are not contributing to their super, despite admitting that they know it's important.
"And 25 per cent of self-employed workers risk retiring with no superannuation. This is a financial disaster waiting to happen, not just on a personal scale, but nationally," gigSuper co-founder Peter Stanhope says.
Gig economy workers will be drawn to the fund because it has built greater flexibility into its product, taking into account the fluctuations in income across the year, Stanhope says.
"We've designed a linked non-super investment account where money earmarked for super can be deposited through the year, and transferred into super at the click of a button at the end of financial year.
"This means you can get back into the habit of putting money aside for your retirement regularly, but can still access those funds should you need to," Stanhope says.
The way in which employers engage workers is evolving and superannuation contributions aren't mandatory for gig workers, which is perfectly legal. "However, this is undermining the entire system," says David Kennedy, who owns retirement planning firm Hillross Pacific Advisory.
"The majority of gig economy workers and freelancers don't take responsibility for their long-term retirement plans by contributing to superannuation," Kennedy says.
Raising awareness of new legislation that allows individuals to make tax deductions as part of an incentive since July 1 last year could encourage individuals to make contributions, he says.
He also suggests that the industry watchdog needs to create a sufficient incentive for individuals to contribute regularly to super as part of the solution.
"The financial services sector needs to think through the implications of the disconnect in the way that we engage with this particular workforce, and the affect on long-term savings outcomes that flexible work flow can bring."
He urged gig economy workers and freelancers to get into a routine so that a percentage of their income is regularly going towards superannuation.
There are two basic ways of making your own super contributions if you're self-employed.
1.If you pay yourself a wage, remember to also send at least 9.5 per cent of your before-tax income to your super fund, or
2.If you pay yourself out of your business revenue, most super funds will let you send a lump sum when you can.
You can contribute up to $25,000 a year and receive a tax deduction, or make non-concessional contributions of up to $100,000 a year. There are also provisions to let you play catch-up.
Spousal contributions are another provision that gig economy workers and freelancers can consider. On July 1, 2017, the spouse income threshold increased, meaning more people are eligible to claim the tax offset for the 2017-18 and future financial years. You can claim the maximum tax offset of $540 if:
- You contribute to the eligible super fund of your spouse, whether married or de-facto, and
- Your spouse's income is $37,000 or less.
For more information about voluntary super contributions, head to the page about contributing extra to super.
Government boosting super
Assessing your eligibility for government super contributions:
- If you earn less than $36,813 a year, you could be eligible for a government super contribution of up to $500. Even those earning up to $51,813 may still be eligible for some government contributions. Consider making after-tax contributions to super to quality for the co-contribution from the government.
- If you earn $37,000 or less a year, the government may make a further contribution of up to $500 to your super to compensate you for contributions as your money goes into super.
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