Understanding the Retirement Savings of Self-Employed Tradespeople in Australia

Abstract

Self-employed tradespeople, like many business owners, face income uncertainty risk. In Australia, self-employed people are excluded from compulsory superannuation. We quantify financial decisions self-employed tradespeople make in retirement preparation, relative to employed tradespeople. We find that they are less likely to hold superannuation assets and more likely to hold business assets and trusts. They also have higher levels of wealth in family homes, other property and equities. We argue that while self-employed tradespeople are relatively wealthier, superannuation exclusion has macroeconomic impacts, like higher charge rates for construction. Moreover, self-employed tradespeople are vulnerable to market conditions when liquidating their business assets.

Keywords: Superannuation; retirement; business owners; tradespeople; investment property

JEL Classification: J180, J780