Speaking at the Senate Select Committee on the Future of Work and Workers, Louise du Pre-Alba, strategic policy advocate at AustralianSuper, expressed concerns that the self-employed are failing to adequately set themselves up for retirement by underpaying their own super entitlements.
“Self-employed people … are under no current obligation, if you like, to provision for their own retirement through super — it's entirely voluntary,” Ms du Pre-Alba said.
“That experience hasn’t been successful and doesn't guarantee the appropriate provisioning for retirement of self-employed people in this country.”
Financial adviser James Trethewie told My Business earlier this year that this is a costly problem for business owners, who withhold their own superannuation payments — and even salaries — in a bid to balance the books.
Indeed, the Associations of Superannuation Funds of Australia (ASFA) found that 19 per cent of self-employed Australians have no super — more than double the rate of employees.
She suggested that forced compliance be introduced as a means of redressing this imbalance, to ensure that all working Australians have an adequate safety net for their retirement, while stressing that any move would have to be done in close consultation with business owners to achieve a workable solution.
“We do think there needs to be some compulsory level of self-provisioning of super by self-employed people,” said Ms du Pre-Alba.
“I think what we would see as an appropriate outcome for this is the beginning of the conversation about how to do this, because a lot of consultation will be required to get to an appropriate solution that fully self-employed people feel comfortable with implementing.
“It could be something that's done in part through the taxation system. It could be something that’s done through guidelines around how much super provisioning should be made in accordance with what sort of service you offer and how you charge for that service.”
She added: “whether they’re fully employees, self-employed or certain types of contractors in the middle-provision for super, we think that the end result of that needs to change so that all people who are in a paid form of employment have the same experience of superannuation.”
However Senator Rex Patrick questioned the feasibility of making such a measure compulsory on business owners, given the existing cash flow constraints facing many operators.
“Having been through the process of running my own company, I know cash flow at the start is a major issue. In fact, it’s a big issue right throughout the entire period of running a business,” Mr Patrick said.
“Where there are what I might suggest are cash flow issues for those businesses and start-up companies, you wouldn’t want to impose something mandatory on them so they have to allocate money per month or per quarter. I assume you'd still want flexibility in there that allowed them to work around cash flow issues.”
Ms du Pre-Alba responded by noting “this is a tough issue”, but suggested that “self-employed people will always have cash issues” needing to be prioritised.
“They will always feel that they need to attend to their business in addition to their own superannuation, and in some circumstances they may prioritise their business interests over their own long-term wellbeing and retirement wellbeing,” she said.
“That’s why I’m saying this is a tough issue, but we do need to start the conversation around self-provisioning.”