Ask Paul: Should I forego super to work for higher pay?


Dear Paul,

I have been offered a great work opportunity on a two-year contract. 

I can choose to be an employee (with superannuation and leave) or a contractor (higher pay without super/leave). My super is already more than $600,000 (I'm 39 and ex-military, hence the high balance). 

Ask Paul Clitheroe Should I forego super to work for higher pay

I am tempted to take two years as a contractor to increase my out-of-super investments and to add to my wife's super, which is lower than mine after time out of the workforce with children. I also thought the tax deduction opportunities would be greater with a contractor's ABN.

Aside from the insurance aspects, can you see any financial downside in a short period of contracting work? - Will

Insurance is certainly one issue, Will, but as you know you can buy cover privately and I suspect your super will have cover. But do check that out and be sure you have appropriate cover.

Beyond that, I am less concerned about you working as a contractor or employee. Obviously, the contract conditions are important, and I would want you to take into account the potential long-term job security that employment would give you compared with a contract.

Once you have established the facts, which you probably have already done, and decided a two-year contract is the way to go, then I understand exactly what you are trying to do and have no problem with your strategy. My suggestion is to visit your accountant and sort out structures and tax breaks, vehicle ownership and so on.

You are young, and I do agree with building wealth outside super, given you have a very solid balance already.

Building your wife's super makes sense, but again discuss this with your accountant or adviser.

The bigger picture interests me the most. I'd be looking beyond the two-year period if you go the contract route and plan what lies beyond that.

Otherwise, you are in a terrific financial position and well on the way to financial independence.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
Money magazine
February 21, 2024 5.03pm


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