Self-employment among Generation Y workers (born between the early 1980s and late 1990s, also known as “millennials”) is reportedly on the rise and predicted to increase dramatically, driven by the proliferation of tech-based platforms. This GIG economy impacts self-employed super and businesses’ need to be more agile! This trend, coupled with the reluctance of most individuals to make voluntary superannuation contributions, means that the outlook is bleak for millennials to achieve comfortable standards of living on retirement several decades hence.
The superannuation guarantee or mandatory superannuation is designed for employees and is ill-equipped to facilitate superannuation for the self-employed; an increasing proportion no longer work in traditional style jobs, hence are outside the superannuation net, and vulnerable ultimately to low retirement provisions!
ATO data from 2014/2015 suggests that around 75% of the self-employed millennials do not contribute to superannuation and therefore miss out on the consistency of regular contributions and the benefit from compounding interest! Yet, self-employed individuals up to 75 years of age, making voluntary contributions to superannuation may now claim full tax deductions for contributions of up to $25,000.00 per annum!
The perceived threat to self-employed workers’ retirement wellbeing, from changing work practices and inadequate superannuation contributions is generating calls for expansion of the compulsory superannuation charge to the self-employed!
Preferably, the self-employed need to be educated to take advantage of the full tax deduction for voluntary contributions and also benefit from the consistency of regular contributions and compounding interest over the long term – their retirement financial wellbeing depends on it!