12 ways casual workers can top up their super balance
The superannuation guarantee has been with us for over 25 years, and while it has benefited many people one group has remained on the fringes of the super system - casual workers.
That's thanks to one of the basic rules of super, whereby employers are only required to make super contributions for employees who earn $450 or more before tax in a calendar month.
Under-18s have it even tougher, needing to clock up more than 30 hours' work a week with the same employer as well as meeting the $450 monthly threshold to be eligible for the boss's super contributions.
Around 2.4 million Australians - 20% of the workforce - are employed on a casual basis.
And while many earn more than $450 before tax each month, it's not always with the same employer.
The super industry body ASFA says it's not unusual for casual workers in low-paying industries such as security, contract cleaning, call centres, childcare and food processing to hold down two or three jobs, adding that many people working casual shifts in aged care, hospitality and retail will have two, three or more employers in a month.
The problem is that the $450 compulsory super threshold applies to each employer separately. As a result, ASFA estimated in 2018 that 220,000 women and 145,000 men are collectively missing out on $125 million in super contributions each year.
ASFA crunched the numbers to show just how much casual workers can be shortchanged in super.
It found a 19-year-old student who works part time in the hospitality industry for four years and earns $4500 a year loses $1710 in super contributions.
A 25-year old working a second job as a hairdresser earning $5000 a year loses $2375 in super payments over five years, and a 30-year-old working two casual labouring jobs and earning $5000 a year from each loses $2850 over three years.
Nonetheless, with no change to the $450 threshold in sight, casual workers need to seize every opportunity to grow their own super.
And it can be done. Our top 12 tips offer simple and budget-friendly options for casual employees to grow a retirement nest egg.
1. Push for permanent employment
While casual employment suits some people, research by ME Bank shows 27% of casual and part-time workers are eager to increase the hours they work and 20% want to change their status to full time.
The good news for these workers is that in July this year our industrial umpire, the Fair Work Commission, agreed to give casual workers covered by 85 awards the right to request full-time or part-time status after 12 months.
Employers don't have to go along with the request but it could be worth a shot. Switching to full-time work can bring income security, opportunities for a promotion and the chance to work enough regular hours to be eligible for super payments.
2. Request more hours
Employer-paid super contributions are based on 9.5% of ordinary time earnings, which includes commissions and shift loadings but not payments for overtime.
The thing is, once you earn over $450 in a month employers are required to make super contributions at the rate of 9.5% of total ordinary time earnings - not just the excess over $450. In other words, if you earn $500 in a month, the boss is required to contribute $47.50 to your super fund.
That makes it worth pushing for just a few extra hours each month to cross the threshold.
3. Check if you're covered by an award
There are exceptions to the $450 a month benchmark. In some workplaces super entitlements are defined by an award or enterprise agreement, and these can see employers obliged to pay super to casual workers who earn less than $450.
Ask your employer if you're covered by such an agreement or visit the Fair Work Commission website for award details.
4. Re-think cash in hand
Casual employees in some industries may be asked whether they would like to be "on the books" or take their wages as cash in hand.
Bypassing the tax system can sound tempting but it can mean missing out on employer-paid super.
Under 2017-18 tax rates, workers can earn up to $18,200 annually before income tax applies.
This works out at $1517 a calendar month, and on that sort of wage your employer would be obliged to make monthly super contributions of $144 (or $1729 annually) - a valuable addition to your retirement savings.
5. Take your super with you
Casual and contract workers often switch between jobs, picking up work wherever they can.
If that sounds like you, make a point of taking your super with you. One of the best ways to achieve this is by choosing your own fund rather than relying on an employer's default option.
6. Watch for fund fees
When you're selecting a fund, it pays to be mindful of fees, which can eat into savings.
According to Canstar, on a super balance of $20,000 you could pay as little as $134 in annual fees or as much as $678, so it's one area where it pays to shop around.
Fees are often expressed as a percentage of your super savings, and HESTA Super, which focuses on health and community services workers, estimates that paying annual fees of 2% rather than 1% could reduce your final super payout by up to 20% over 30 years.
The latest survey by SuperRatings shows three of the cheapest publicly available super funds are Vision Personal ($228 annually on a $50,000 account balance), Bendigo SmartStart Super ($313) and Energy Industries Superannuation Scheme ($315).
If you've previously gone with the fund selected by your employer, your super should have been automatically transferred into a MySuper account by July 1, 2017.
This is a low-fee fund with simple features and either a single diversified investment option or investments that change over your life-cycle. If you have already chosen an investment option within your existing fund you can opt to move to MySuper.
Industry funds, which are typically not-for-profit organisations, have a reputation for charging low fees, and some represent sectors such as retail and hospitality where casual work is common.
A number of industry funds have shown that scrimping on fees doesn't have to mean poor investment performance.
According to SuperRatings, the top three highest-earning super funds for the 2016-17 financial year were Hostplus (13.2%), AustralianSuper (12.4%) and Sunsuper For Life (12.3%) for the balanced investment option.
7. Review your life cover needs
Around eight out of 10 super fund members sign up for default life insurance cover, and while that's a good thing for many workers the annual premiums, which are paid directly out of super savings, can rapidly erode the balances of younger workers who may not need life insurance.
That makes it worth reviewing the cost of life cover through your fund and assessing whether you really need it, particularly if you are a young casual worker with no major debts and no dependants.
8. Consolidate your super into one fund
Tax Office figures show 43% of Australians have more than one super fund - one in five of us have at least three super accounts.
Holding multiple accounts means losing more of your super to fees and perhaps doubling up on life insurance premiums.
It also makes it harder to keep track of your nest egg throughout your working life, and a good chunk of the nation's $14 billion pool of lost or unclaimed super is believed to be the result of casual workers moving between jobs.
Tracking down lost super has become easier, and many funds have an option to search for missing super online.
Once you've found all your super balances, roll multiple accounts into your preferred fund. Check if this could mean paying excessive exit fees or losing life insurance. If you have a pre-existing medical condition, for instance, it could be harder to obtain cover through a new fund.
9. Check that your contributions are being paid
A 2016 report by Industry Super Australia and Cbus estimates that almost one in three workers are not being paid part or all of their compulsory super.
Your payslips should show the super contributions made and the name of the fund. Compare these payments against your super fund statements to see if the contributions have been deposited.
Contributions must be made at least quarterly so there can be a delay of up to three months. If you can't see where the contributions have been made, speak to your employer or lodge an unpaid super inquiry with the tax office.
10. Get the government to chip in
As casual workers often earn a low annual income, employer contributions may not be sufficient to fund a quality lifestyle in retirement. This makes it important to consider voluntary payments. It could even see you entitled to some "free" money.
If you earn less than $51,813 annually and make an after-tax contribution you may be eligible for a government co-contribution of up to $500. Depending on your income, the co-contribution can be worth 50c for every $1 you contribute up to a maximum co-contribution of $1000.
Check the co-contribution calculator on the MoneySmart website to see if you are eligible for the scheme and how much you're entitled to receive.
11. Ask your spouse to lend a hand
If you earn less than $40,000 annually, ask your spouse or partner to make a contribution to your super fund.
It could see your other half entitled to a tax saving of up to $540 under the spouse super tax offset.
12. Be wary of sham contracting
Casual workers need to be wary of what the Fair Work Ombudsman describes as "sham contracting".
This is where a person working as an employee is told they are an independent contractor and therefore not entitled to employer-paid super.
Quoting an Australian business number (ABN) doesn't necessarily mean you're a contractor. According to the FWO, signs that you are an employee include:
- Your work is directed and controlled by your employer.
- Income tax is deducted by your employer.
- You are paid wages or a salary regularly. If you're unsure about whether you are a contractor or an employee, contact the FWO on 131 394.
Get $500 back in your pocket
From July 1, 2017 workers who earn up to $37,000 will benefit from the new low income super tax offset (LISTO).
LISTO is essentially a refund of the 15% tax that applies to before-tax super contributions.
The maximum payment is $500 annually - and the money goes directly to your super account.
There's no need to lodge a tax return. The tax office will work out your eligibility using contributions information provided by your super fund.