Independent contractors earning $90,000 or more who do not make superannuation contributions should be hit with a levy to help fund the age pension, says a new report from the John Curtin Research Centre commissioned by Vision Super.
The report, authored by Curtin executive director Nick Dyrenfurth, made a series of recommendations in response to the rise of the gig economy and the gender superannuation gap that sees women retire with average balances of $180,000 compared with $322,000 for men.
It called for employers to make pro rata super contributions for part- timers who earn below the $450 per month minimum from one employer to qualify for super guarantee payments.
The rise of the gig economy is eating away at superannuation contributions from two ends. On one hand, the rise of part-time and gig work means that more workers are missing out on super contributions because they fall below the $450 threshold.
“Less than half of Australian workers now hold down a full-time permanent job. Twenty-three per cent are employed casually, the remainder being part-time, labour hire or contractors,” the report found.
Among higher-paid workers, there is also a move away from permanent employment with ABS data showing about one million Australians, or 9 per cent of all workers, worked as independent contractors in their main jobs.
And many of those higher-paid workers are not paying super, the report found.
“Research by Expert360 predicts that 40 per cent of the professional workforce will become on-demand, freelance workers by 2025. Half of all big businesses will rely on at least 20 per cent of their workers being contractors, consultants and temporary employees within the next three years.”
These contractors are not entitled to super guarantee payments from employers and many choose not to make the voluntary contributions they are entitled to make. The report called for a pension levy to be paid where contractors don’t contribute the 9.5 per cent of salary specified by the super guarantee (SG).
Where they make a super contribution below the level of the SG, they would be levied on the difference by the Australian Taxation Office.
However, to make the levy more palatable “during the first three financial years of the new arrangements, all contractors will be eligible for a 150 per cent tax deduction for super payments made to a complying super account”, the report recommended.
Peter Strong, CEO of COSBOA, a small business advocacy group, said “a lot of small business people and contractors choose not to make super contributions and invest in their business. The levy would make things increasingly complicated and those not complying would have more difficulty with the ATO”.
An easier solution would be to charge the ATO with collecting all superannuation contributions as part of income tax payments with the ATO asking the tax payer which fund they would like to use, Mr Strong said.
Ken Phillips, CEO of Independent Contractors Australia, said such a move would be “an insult to independent contractors who are among the most entrepreneurial people who take risks which benefit the economy”.
“They often mortgage their homes and take risks that people will not pay them to allow them to operate,” Mr Phillips said.
“For many of these people they can build greater security by paying off their home mortgage on a tax free asset than building up super contributions on an asset that might return less than their home.”
A superannuation spokesperson for the ALP said: “While we recognise super contributions for contractors is an issue, Labor does not have a position on John Curtin Research Centre’s specific recommendation regarding a compulsory levy on contractors.”