The term ‘gig economy’ has become well-known in regard to the way many of us work, and working in the gig economy and offering a service, has become the norm for many Australians to make a living. Also known as the 'on demand workforce' broadly consists of self-employed people who find work on a task or contract basis. Often these jobs come through purpose-built 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 amount 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 not entitled to a range of benefits, including sick pay, annual leave and superannuation.
This leaves the responsibility of putting money into your super and saving for retirement with you, the worker.
Do you have to make your own super contributions?
If you’re a gig worker there are a few things you should be aware of. For example, superannuation for contractors works a little differently to what you might be used to.
Most gig workers are paid per job, and not as part of a company’s payroll. Meaning, 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 yourself2. Any super you pay will be 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.
Most 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, and 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 extra each year could make a big difference to your retirement lifestyle down the track.
Tax deductions for super contributions
Many gig-workers will be able to claim a tax deduction for contributions they make to their super.
After tax (non-concessional) 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: non-concessional and concessional:
Before-tax (concessional) contributions
You can sometimes claim a tax deduction for contributions you make before tax. The amount you can claim is generally up to the annual concessional contributions cap. This limit changes most years at the start of July.
If you contributed less than the 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.
If you’re over 67 and these contributions aren’t coming from an employer, they’re seen as personal contributions. You’ll need to satisfy the work test to make these.
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. This has to be done before your lodge your income tax return. Once your deduction has been processed, the amount claimed as deduction becomes a concessional contribution. Contributions tax will be 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.
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. There is an 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.
For more information download our factsheet: Add to your super with government co-contributions
If you’re being paid by an employer
If you’re a contractor who’s 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 employee/contractor decision tool to find out who should be paying your super. This is an important check so 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, then you should know that the legal minimum payment is 10% of the value of your wage. This is called the Superannuation Guarantee, and the money must generally be paid into you’re nominated super fund. It’s your responsibility to let your employer know which fund this is.
You’re eligible for the Super Guarantee if you’re:
- Classified as an employee (as opposed to a contractor)
- 18 years old and over, and earn more than $450 before tax in a calendar month
- Under 18 years old, earn more than $450 before tax in a calendar month, and you work more than 30 hours a week.
Quick checks to manage your super
1. Find all of your super
The nature of gigging can mean multiple employers, which means many people end up with more than one super account. This can result in lost super and paying multiple admin fees and insurance premiums.
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 – and give the Fund consent to use your Tax File Number (TFN) – we can help make sure you know where your super is.
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 making a decision to consolidate multiple funds, look out for any fees or charges that may apply for closing an account. Make sure you also understand the impact of consolidating your accounts on any additional benefits, such as insurance.
3. Know your insurance cover details
Admin fees are taken from your super, so not making payments can reduce your overall balance, which can affect your insurance. For example, in some circumstances, insurance cover linked to your super could lapse if there are no contributions made.
Working as a contractor or freelancer could affect the conditions that apply. The Insurance in your super guide contains terms and conditions about insurance, including costs, your eligibility for cover, how much you can apply for, when cover starts and stops and limitations or exclusions.
Different terms and conditions apply to our different divisions. If you don’t know which division you’re in, you can check by logging into your account and going to ‘My insurance’ then ‘Insurance options’, 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 see your balance now.