Understanding the retirement savings of self-employed tradespeople in Australia

Over the last decade, the Australian Building and Construction Commissioner (ABCC) together with the Association of Superannuation Funds Australia (ASFA) have raised concerns over the exclusion of self-employed tradespeople from Australia’s compulsory contribution system for employed people. We use logit models to compare the superannuation investment, as well as other assets, of self-employed tradespeople to employed tradespeople. We find self-employed tradespeople are less likely to hold superannuation assets and more likely to hold business assets, the family home, other property and equities. Self-employed tradespeople therefore save for retirement through investment in these alternative assets but are exposed to market uncertainty if they are reliant on the sale of the business to fund retirement consumption. We argue that, while self-employed tradespeople are relatively wealthier, superannuation exclusion has wider impacts related to the property industry, such as higher construction costs, increased demand for investment properties and associated tax advantages, and automation risk.