20 July 2023
The term ‘gig economy’ has become well-known as a way many Australians make a living. Also known as the 'on demand workforce', it broadly consists of self-employed people who find work on a task or contract basis. Often these jobs come through purpose-built mobile apps, such as rideshare, food delivery, dog walking, babysitting and DIY help.
If you consider yourself part of the gig economy, then you’re part of an increasing number of people who make their living this way. So, what does that mean when it comes to managing your super?
Working in the gig economy
Unlike a traditional employer-employee arrangement, on-demand workers are generally not entitled to a range of benefits, including sick pay, annual leave and superannuation.
This leaves the responsibility with on-demand workers to put money into super and save for retirement.
Making your own super contributions
If you’re a gig worker there are a few things you should be aware of. Most gig workers are paid per job, and not as part of a company’s payroll. In the eyes of the Australian Tax Office (ATO), you’re considered self-employed or a sole trader. As such, you generally don’t have to make super guarantee payments to yourself1. Any super you pay is your choice, rather than a legal requirement.
Why pay yourself super
If super’s not a legal obligation, you might wonder why some gig-workers, contractors and freelancers pay it to themselves.
Many people will live in retirement for at least 25 years. It’s a substantial amount of time, often referred to as ‘the next third’. How much super you’ll need in retirement can depend on a few factors. What kind of retirement do you want? For example, do you want to travel the world, buy a new car, pay off a mortgage? Or do you want a simpler life? The reason this is important to think about is that it’ll help determine how much money you’ll need in retirement, and could help you plan how much you’ll need to contribute to your super over your working life.
AustralianSuper’s Super Projection Calculator can help give you an idea of what your future income will look like, with and without super. It can also show you how adding a small amount extra2 each year could make a big difference to your retirement lifestyle down the track.
Tax deductions for super contributions
As a gig worker you may be able to claim a tax deduction for super contributions you make. There are 2 main types of contributions: concessional and non-concessional.
Before-tax (concessional) contributions
Before-tax or ‘concessional contributions are super contributions that come out of your before-tax pay. They include personal before-tax contributions you make via salary sacrifice, Super Guarantee contributions an employer pays for you (if eligible) and any after-tax personal contributions you make and claim a tax deduction for.
After-tax (non-concessional) contributions
After-tax or ‘non-concessional' contributions are super contributions you make from money you’ve already paid tax on, like your after-tax salary, an inheritance or a tax refund.
You may be able claim a tax deduction for personal super contributions you make from your after-tax income. The personal super contributions that you claim as a deduction will count towards your annual concessional contributions cap.
If you didn’t use the full amount of your concessional contributions cap in previous business years, your contribution cap may be higher, meaning you can add more. This is called the carry-forward of unused concessional contributions.
How to claim a tax deduction for your super contribution
If you want to claim a tax deduction for personal super contributions you must lodge a form with your super fund called a Notice of Intent to Claim a Tax Deduction for Personal Super Contributions3. Once your deduction has been processed, the amount claimed as deduction becomes a concessional contribution. Contributions tax will then be deducted from your account.
The form must be lodged before you combine multiple super accounts, transfer super to another account (such as a pension) or make a withdrawal.
There are two ways to tell us you want to claim a tax deduction for super contributions, using either an online form or PDF form.
The Australian Government co-contribution initiative supports low and middle-income earners by boosting their super contributions, helping to grow their retirement savings. Put simply, the Government matches a certain amount of contributions you make to your super, up to a maximum amount of $500. There is eligibility criteria you need to meet. Any co-contribution gets paid directly into your super account after you’ve lodged your tax return for that year, proving your income.
If you’re being paid by an employer
If you’re a contractor paid via your employer’s payroll, you should receive compulsory super payments from your employer. So it can be worth checking to see if you’re getting paid what you’re owed.
According to the ATO, if you’re a contractor paid mainly for your labour, then you might be considered an employee for superannuation purposes. That means you could be entitled to contributions paid into your super account by your employer.
If you're not sure, you can use the ATO's 'Am I entitled to super?' tool to find out whether you are entitled to super from that employer. This is an important check so that you don't miss out on any owed super.
The Superannuation Guarantee – if your employer is paying your super
If you’re entitled to compulsory super payments from your employer, the legal minimum payment is 11% of your wages (for the financial year 2023-24). This is called the superannuation guarantee, and the money must generally be paid into your nominated super fund. If you don’t nominate a super fund, your employer may pay this into an existing ‘stapled’ super fund. If you don’t have an existing stapled super fund, your employer will pay this into their default super fund for you.
You’re eligible for the super guarantee if you’re classified as an employee (as opposed to a contractor).
Quick checks to manage your super
1. Find all your super
The nature of 'gigging' can mean you have multiple employers, and you may have more than one super account.
You can check for multiple accounts and find any lost super you may have using the ATO online services through myGov. Alternatively, if you’re an AustralianSuper member you'll need to log into your account on the member portal – and give the Fund consent to use your Tax File Number (TFN).
2. Consolidate multiple super accounts
If you do discover multiple accounts and lost super, consider consolidating your money into one account to avoid confusion in the future. This will make it easier to keep track of any future returns, as well as your balance.
Before deciding whether to consolidate multiple funds, look out for any fees or charges that may apply. Make sure you also understand the impact of consolidating your accounts on any benefits, such as insurance.
3. Check your insurance cover
In some circumstances, insurance through your super could stop if there is no money (any contribution or rollover) added to your account for 16 months. See the Insurance in your super guide for more information about when cover stops and what you can do to keep your insurance.
If you don’t know what insurance cover you have, you can check by logging into your account and going to ‘Insurance’ then ‘Manage insurance’, or check your member statement.
4. Know your super balance
Your balance will be provided every year in your annual statement, but it’s a good idea to keep an eye on it throughout the year. AustralianSuper members can check how their super is performing by logging into your online account. Members can also download the app to monitor their balance and make on-the-spot contributions – an easy way to contribute on an ad hoc basis.
If you’re responsible for your own super payments, consider setting up a simple direct bank transfer each month or quarter, to make sure you’re keeping your financial future secure.
If you’re an AustralianSuper member, you can also log in online and check your balance now.
1. Work out if you have to pay super: Australian Taxation Office
2. Before adding to your super, consider your financial circumstances, contribution caps that may apply, and tax issues. We recommend you consider seeking financial advice.
3. This must be done by the earlier of either the day you lodge your income tax return in which you made the contributions or, the end of the income year following the one you made the contributions.
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