MANY WORKERS STILL SHORTCHANGED

Investors should try to stay out of the firing line

The $450-a-month threshold might be gone, but other obstacles remain that shortchange workers from getting employer-paid super.

ASFA notes there are many workers who are engaged under a commercial contract for services but who have little discretion in regard to how they carry out their role and have work arrangements that resemble those of employees.

ASFA says they can best be described as “dependent contractors”.

“Part of the challenge we have at the moment is the ‘self-employed’. They sit outside the super system. Historically, they might have built an asset that they would’ve sold to fund their retirement,” says ASFA’s Martin Fahy.

“We want to make sure they don’t fall between the cracks of compulsory, universal superannuation because that will increase the burden on the age pension. Part of the logic was that these people were building a business they could sell, whether an accounting practice, dental practice or pharmacy. Increasingly, the self-employed don’t build an asset that they can monetise.

“They’re in a dependent contractor relationship where their work is organised. What we mean by that is their work is organised and their hours and activities are largely dependent on a single relationship. We believe that’s a new category.”

He says greater clarity is needed within the legal system, so that “dependent contractors” can be regarded as a new category of work subject to SG arrangements.

“The danger is, as we go forward and see more of the type of gig work that we’ve seen, that we end up with a large number of people who have been effectively self-employed for the duration of their career, who haven’t built an asset that they can monetise and end up coming up short and on the age pension in retirement.”

Be more proactive

Wealthadvice’s Marisa Broome says most good employers that offer a contract will also make super contributions.

“A lot of contractors are contracting with just one person and super would have been paid for them, but if the contracting is with lots and lots of different people, then they may have a different set-up. It does vary contract to contract.”

This means workers need to be more proactive when negotiating employment. Fahy says the old certainties of a job for life with a single employer no longer applies.

“Regardless of whether you are moving employer every 24 to 36 months, or whether you are self-employed, or whether you are working a portfolio of jobs, the benefit of compounding on early contributions of super has a disproportionate effect on your retirement outcomes.

“Get all the super that’s due to you, consolidate all your super, keep track of your super and ultimately what you’ll find – even if you are a self-employed person tempted to defer contributions – is that it’s a very tax efficient way of saving. “It’s a really good outcome for you and for the Australian public in general.”

In a series of addresses in recent years, the Chinese president, Xi Jinping, has declared that the world is undergoing “great changes unseen in a century”.

Tensions between China and the US are palpable. Other countries’ geopolitical differences are also becoming clearer in the greatest political theatre taking place right now: the contest between China and the US for global dominance.

China believes the next 10 years will determine the outcomes. How this theatre plays out in the short, medium and long term will clearly have implications not just for investment portfolios.

Some years ago, Singapore’s founding father, Lee Kuan Yew, who had intimate knowledge of China, agreed to the suggestion that Chinese leaders are serious about displacing the US as the number one power in Asia and globally. Some studies have suggested that this goal is backed by a grand strategy with military, economic and political objectives.

The grand strategy has three broad “forms of control” to regulate the behaviour of the US, its allies and other states that China is seeking to bring under its influence or control. The three controls are: coercive capabilities (to force compliance on the other state), consensual inducements (to incentivise it) and legitimacy (to rightfully command it). A recent example of coercive capabilities occurred when China restricted Australian imports.

The US uses the same three forms of control and currently has the upper hand. China sees itself as the rising power and it is trying to weaken US control over other states by firstly trying to weaken US controls in Asia and then globally. Strategically speaking, once the dominant power becomes weakened in its exercise of the three forms of control, the rising power then builds and expands its forms of controls over other states. This is the template described by China watchers as the grand strategy of displacement. The implementation of the strategies to weaken the dominant power’s controls and the building and expansion of the rising power’s controls comes in phases, which are usually connected by major global events. So far China has implemented three phases of displacement against the US. The first occurred between 1989 and 2008 when China quietly weakened US power over China in Asia.

In the second strategy, between 2008 and 2016, China moved forward to build the foundations for regional hegemony in Asia – for example, the One Belt One Road project. This phase was launched after the 2008 financial crisis in the US.

And in the third phase, during global changes unseen in a century, China seeks to capitalise on a range of issues weakening the controls of the US and its allies on other states, particularly following Brexit, with the UK withdrawing from the global stage. On top of this, President Donald Trump’s revisionist policies saw the US becoming more domestically focused. The Covid-19 pandemic further distracted and weakened the US on the domestic front, supply chain issues have stoked inflation and interest rates in the US and allies, and the Russian invasion of Ukraine, with China’s blessing,

has further strained energy supplies and resulted in soaring prices.

China’s increasing assertiveness will bring with it an authoritarianism that is not compatible with the liberal democratic systems revered by the US and its allies.

But the US has shown time and again that it can make a comeback against threats to its dominance. It was written off during the Great Depression in the 1930s, and Germany and Japan were seen as the emerging economic powers. Then President Roosevelt delivered the innovative New Deal programs, which saw the US climb back to prime position after World War II.

It has the advantages of a younger population, financial dominance, abundant resources, peaceful borders, strong alliances, an innovative economy, and an openness that attracts talent from across the world.