Note: Effective from 1 July 2014, the Superannuation Guarantee rate increased to 9.5% (from the 9.25% that applied for the 2013/2014 year). Due to recent changes in the law, the SG rate will remain at 9.5% until June 2021, increasing to 10% from July 2021, and eventually to 12% from July 2025. See comprehensive table near end of article.
The previous ALP government legislated a gradual increase in the Superannuation Guarantee rate, starting with a 0.25% increase (from 9% to 9.25%) which took effect from July 2013. The SG rate was then to steadily increase over a 7-year period, to 12% by July 2019.
Background: Originally the Liberals were against the 12% Superannuation Guarantee increase, and then relented and made a public commitment to the historic superannuation increase, once the legislation was passed. Unfortunately, they had had a taste of the ALP’s fiddling at the fringes of super policy. It was in April 2013, before the 2013 federal election that the Liberal party promised “We will ensure that no more negative unexpected changes occur to the superannuation system so that those planning for their retirement can face the future with a higher degree of predictability.” That’s right, but they didn’t mean the promise applied to this super change.
Under new laws passed by the Liberal government, the SG will now not reach 12% until July 2025 (start of the 2025/2026 year), another 7 years from what was set out in the previous laws. See table below for new timeframe for SG increase.
Superannuation Guarantee (SG) is the official term for compulsory super contributions made by employers on behalf of their employees. An employer, regardless of whether they are a small or large business, must contribute the equivalent of 9.5 per cent of an employee’s salary (before July 2014, the percentage was 9.25% for 2013/2014 year, and 9% for 2012/2013 and earlier years).
How did the Liberal government stall the SG rate increase?
Before the 2013 federal election, the then opposition leader, Tony Abbott, announced that if the Coalition won the election, the Superannuation Guarantee increases would be frozen at 9.25% for 2 years, and consequently the full SG increase to 12% would be delayed for 2 years, taking effect from 1 July 2021.
Since winning government, the Liberal government then announced it would be delaying the full SG increase to 12% by another year (1 July 2022). Now that’s a negative change to super, and the Liberals promised not to make any unexpected changes to super in the first term. Before you tut tut the behavior of the former PM (Tony Abbott), or perhaps disagree with my interpretation of events, the story gets even worse.
In the May 2014 Federal Budget, the then Treasurer Joe Hockey delayed the full increase even further by allowing the SG increase to 9.5% from July 2014, but freezing the SG rate at 9.5% for 3 years. As a result, the full SG increase to 12% was set not to take place until the 2022/2023 year, adding another 2 years to the timeframe, and 4 more years than what was set out in the law.
Again, the story gets worse.
Under new laws negotiated through a hostile senate, the SG will now not reach 12% until July 2025 (start of the 2025/2026 year), another 7 years than what set out in the previous laws. See table below for new timeframe for SG increase.
Superannuation Guarantee entitlements
|SG rate increase|
|Current SG rates||Previous law|
|Financial Year||Rate (%)||Rate (%)|
|2012/2013 (starts 1 July 2012)||9.0||9.0|
|2014/2015 (starts 1 July 2014)||9.5||9.5|
|2021/2022 (starts 1 July 2021)||10.0||12.0|
Source: Adapted from explanatory memorandum for Mineral Resource Rent Tax Repeal and Other Measures Act 2014.