Investor InsightsSuper Stategies > How to grow your super and investments through the gig economy

How to grow your super and investments through the gig economy

June 2020

As the economy starts to recover there may be opportunities in the gig economy to make money. Perhaps it’s a supplement to your existing income, a way to generate income in between permanent employment or a new career direction. Investing some of the cash you make via online platforms can give your finances a boost – whether it’s towards shorter-term investment goals, or in your super for retirement.

Understanding the gig economy

The terms ‘on-demand economy’, ‘sharing economy’ and ‘gig economy’ refer to the process whereby buyers and sellers of goods and services can connect with one another via digital platforms which typically charge a commission on transactions.

Popular platforms such as Airtasker and Freelancer have become household names in recent years. There are also dozens of lesser-known sites which focus on contracting out specific skillsets such as app development, writing or graphic design.

Australians have embraced the gig economy concept with enthusiasm, as both buyers and sellers of goods and services.

A national survey commissioned by the Victorian government in 2019 found more than seven per cent of Australians were working on digital platforms, or had done so during the previous year. They earned an average of $32.16 an hour.

More than a third of Australia’s gig economy workers are active on more than one platform and 11.4 per cent of workers are registered on four or more platforms.

Joining their ranks can be as simple as signing up online to the platform of your choice. Depending on the nature of the product or service you’re offering, you may be asked to meet specific requirements, prove a skillset or verify your credentials.

Getting the most out of your gig economy earnings – investing not just saving

As the economy improves, if you can afford to do so, investing a proportion of your gig earnings could see a greater long-term benefit. You could choose to work with your financial adviser to enhance or establish an investment portfolio, or perhaps take a longer-term approach and top up your super – or both.

Make sure you’re taking care of the long term

If you’re working in the gig economy (for the purposes of income derived from gig work), you may be deemed to be a self-employed freelancer or an independent contractor for tax purposes and be asked to register for an ABN.

If you are under this arrangement, your tax and super won’t automatically be taken care of as it is with a traditional employer. Your gig ‘employer’ is not responsible for your tax or for paying the superannuation guarantee, currently 9.5 per cent of base salary for full-time, part-time and casual employees, into your super fund. If gig work is your sole income, this is a pitfall to beware of.

It doesn’t mean you can’t make contributions on your own behalf. Committing some or all of your gig economy earnings to super can be a great way to turbo-charge your super balance.

Thanks to the benefits of compound interest, topping up your account with personal contributions can see your balance grow significantly over time. If you start early enough, an extra $150 or $200 a month can result in an additional $100,000 or more in your super account by the time you retire.

That represents additional financial security which can enable you to enjoy a more comfortable lifestyle when it’s time to retire.

There can also be tax advantages associated with making personal super contributions. If you claim a tax deduction for your personal contributions (known as concessional contributions), they are generally taxed at 15 per cent, a rate which is lower than most people’s marginal tax rate.

Continuing to build your super and save for your retirement is important as delays could have a significant impact on your retirement savings. A qualified adviser is well placed to help make strategic investment decisions appropriate to the economic conditions.

Seeking professional advice

Your financial adviser can help you to understand your financial position and explore ways to grow, maintain and preserve your investments and/or super balance – particularly in challenging economic times.

If your financial position has changed – for example if you are earning extra in the gig economy, are doing gig work between jobs or have entered the gig economy full time – it’s important to consult your financial adviser to reevaluate your goals and ensure your investment strategy continues to align to your needs.

This article is issued by OnePath Custodians Pty Limited (OnePath Custodians) ABN 12 008 508 496, RSE L0000673, AFSL 238346 and OnePath Funds Management Limited (OnePath Funds Management) ABN 21 003 002 800, AFSL 238342

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