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Superannuation Guarantee rate 9.5% for 2016/2017 year, and for 2017/2018 year

The Superannuation Guarantee rate remains at 9.5% for the 2016/2017 financial year, and again remains at 9.5% for the 2017/2018 financial year. The Superannuation Guarantee rate first increased to 9.5% from 1 July 2014 (the 2014/2015 year), and remained at 9.5% for the 2015/2016 year.

Based on revised laws, the Superannuation Guarantee (SG) rate will remain at 9.5% for another 5 years, increasing to 10% from July 2021, and eventually increasing to 12% from July 2025 (see table below, and more comprehensive table later in the article).

Financial yearSG Rate
2012 /20139.0%
2013 / 20149.25%
2014 / 20159.5%
2015 / 20169.5%
2016 / 20179.5%
2017 / 20189.5%
2018 / 20199.5%
2019 / 20209.5%
2020 / 20219.5%
2021 / 2022 10.0%
2022 / 202310.5%
2023 / 202411.0%
2024 / 202511.5%
2025 / 2026 12.0%

Superannuation Guarantee is the official term for compulsory superannuation 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% of an employee’s ordinary earnings for the 2016/2017 year (and also for the 2017/2018 year), and was also the case for the 2014/2015 and 2015/2016 years. (The SG rate was 9.25% for the 2013/2014 year).

When will the SG rate increase to 12%?

Background: Originally, the SG rate was set to increase to 12% by July 2019 under laws passed by the former ALP government. The increase to 12% was then pushed back to July 2020 by the new Liberal government, and then pushed back again to July 2022. In the 2014 Federal Budget, the Liberal government further delayed the SG increase by stretching the timeframe over 12 years. Due to negotiations with the Palmer United Party to get the Mineral Resource Rent Tax repealed, the timeframe has now stretched to 1 July 2025. Australian workers will receive 12% SG from 1 July 2025.

Effective since 1 July 2014, the Superannuation Guarantee percentage increased to 9.5%, and the increase to 12% has been delayed to July 2025 (due to changes made by the Liberal government). The original starting date for 12% SG was July 2019, which had been planned by the former ALP government, and what was in place before the Liberals won the 2013 federal election in September 2013, and pushed back the starting date.

Note: In short, the SG rate will now remain at 9.5% until 30 June 2021, and will then increase to 10% from 1 July 2021, and then increase by 0.5% increments each year until it reaches 12% by 1 July 2025. See comprehensive table below for more specific information.

The Liberal government, in making a downward adjustment in how fast the SG rate will increase over time means that it will take 5 years longer for the SG rate to increase to 12% from the Liberals 2013 pre-election commitment, and 7 years longer than originally planned by the ALP .

Superannuation Guarantee rates

Financial yearCurrent SG rates
(under Liberals)
Old SG rates
(under ALP)
2012 / 2013 (starts 1 July 2012)n/a9.0%
2013 / 2014n/a9.25%
2014 / 2015 (starts 1 July 2014)9.5%9.5%
2015 / 20169.5%10.0%
2016 / 20179.5%10.5%
2017 / 20189.5%11.0%
2018 / 20199.5%11.5%
2019 / 20209.5%12.0%
2020 / 20219.5%12.0%
2021 / 2022 (starts 1 July 2021)10.0%12.0%
2022 / 202310.5%12.0%
2023 / 202411.0%12.0%
2024 / 202511.5%12.0%
2025 / 2026 (starts 1 July 2025)12.0%12.0%

Source: Adapted from explanatory memorandum for Mineral Resource Rent Tax Repeal and Other Measures Act 2014

Note: If your employer fails to pay the required rate of SG to your super fund by the quarterly due date, your employer may be subject to the Superannuation Guarantee Charge (SGC). The SGC is a penalty that your employer must pay to the ATO. The SGC includes the SG owing to an employee or employees, interest on the SG amounts owing, plus an administration fee. Your employer must lodge the SGC statement (if failed to pay SG, or was late paying SG) by the due date and pay the SGC to the ATO. The majority of this SGC will eventually make its way to your super account. For more information on non-paying employers, see SuperGuide article Super for beginners, part 18: My employer hasn’t paid my SG. What can I do?

What does the SG increase, and its delay, mean for your retirement plans?

Background: In May 2010, employed Australians received a pleasant surprise when the then-federal treasurer, Mr Wayne Swan, announced that compulsory employer super contributions were set to jump from the current 9% of salary to 12% by July 2019, an eventual 33% increase in Superannuation Guarantee (SG) contributions. On 29 March 2012, the proposed increase in SG entitlements received Royal Assent and became law. The new Liberal government promised to continue the SG rate increase, but at a slower rate.  The Liberal government introduced amendments to slow down the increase in the SG rate, and then in negotiations in parliament, further slowed down the SG increase.

The Liberal government promised in the 2014 Federal Budget that the SG rate increase will stall for 3 years (from 1 July 2015), rising to 10% from 1 July 2018. The SG rate would then increase by 0.5% each year until it reached 12% by July 2022. What the Liberal government has now enacted is that the SG rate stalled at 9.5% from 1 July 2015 for 7 years (until 30 June 2021), and then increases by 0.5% each year following until the SG rate reaches 12% from 1 July 2025.

Note: Under the former SG laws passed by the ALP government, the full 3% increase was to take effect from July 2019, while under the Liberal changes, the full 3% increase in SG rate will now take effect 7 years later, from the start of the 2025/2026 year.

What does the delay in the SG rate increase mean politically?

An interesting stumble in the selling of the SG rate increase, is that the company tax rate was eventually going to fall to 28% which the Government argued would soften some of the SG increase for employers. The promise was that from July 2013, the company tax rate would decrease to 29% (from 30%) and from July 2014, the company tax rate would decrease to 28%. During 2012, the former ALP Government announced that the cut to company tax rates would not go ahead.

In the 2014 Federal Budget, the Liberal government announced a proposed drop in the company tax rate by 1.5%, but an offset levy for large companies of 1.5% to help finance the Paid Parental Leave levy. Smaller companies however would not have to pay the PPL levy, so would arguably benefit financially from the drop in company tax rate. The PPL levy in its current form is now defunct, and the proposed cut in company tax rate to 28.5%, promised to take affect from 1 July 2015, has morphed into a small business corporate tax cut, applicable to businesses with a turnover of less than $2 million.

Note: Subject to legislation, from 1 July 2016, the small business corporate tax rate will drop to 27.5% for businesses with an aggregated annual turnover of less than $10 million. From 1 July 2017, the 27.5% tax rate will also apply to companies with an aggregated annual turnover of less than $25 million, and from 1 July 2018, to companies with an aggregated annual turnover of less than $50 million, and the turnover threshold gradually increases to $1 billion by from 1 July 2022. From 1 July 2023, all companies will be subject to the 27.5% tax rate, which drops to 27% for the 2024/2025 year, and then 26% for the 2025/2026 year and then 25% for the 2026/2027 year. Note that these changes to the company tax rate are still subject to legislation being passed by parliament.

Comments

  1. Stephen kavanagh says:

    All this tinkering with the super SG as let me a little miffed to say the least. People must I hope soon all real super is a tax effective vehicle for investing and is put in place so that we all can retire with piece of mind and not be under financial stress. I’m 32 now and when I’m ready to retire the pension will be gone. It is unstatainable at current rates especially with an aging population like we have. For it to continue incom tax would have to go to 50 percent plus. It’s up to all of us to contribute to determine our own future and the tax system lets us do this efficiently. But I work in the private sector and only get 9.5 percent and know have to wait 10 years at the moment or buy that time plus many more to get to 12 percent where the state and federal employees are all ready on 12 and if they use a organisation called rim serve and sacrifice up to the max 5 percent then they get an extra .75 percent from there employer which means each fort nite cause there’s is paid with there pay each period where we may have to wait up to 3 months for our contribution. Is 17.75 percent and the police get 18.75 percent because they are made to retire at 60. Made to retire not the option what crap is that. People may read this and say good for them who cares but the figures don’t lie and tell the real story. My wife and I are the same age I have worked 4 years longer in an apprenticeship while she had 4 years at uni at most times during my career I have earned more that her. I have been salary sacrificing since the first day I became a tradesman as well as always choosing the high froth option because of my age. When she started she did sign up to rim serve and contributed the maximum but only had her money placed in the balanced option the default one for most super funds. At today’s figures her super is nearly double mine. So u tell me why our polies are so happy to delay our SG rate and have a 3 month wait on our contribution even if u salary sacrifice. And have a completely different system for them. It’s an utter joke and screwing hard working Australians retirement benefits in future. Everyone should revive the same SG and it should be paid into our designated fund with each pay so it can start working for us not our employer who uses our super before he has to legally pay it to us. More Australians need to care about your super remember it’s your money at the end of the day we fight for pay rises but not for this. But in forty years time people will sit back and go Ono hind site is a good thing we need to get the SG lifted now not in 10+ years time.

  2. I think there is enough pressure on small business (and medium business) already with the 9.5% super. Additional taxes and charges already apply on this increased super (increased workcover and payroll tax). Surely some responsibility for retirement has to go on the individual – there is already too much hand holding in our Australian economy. People need to take some responsibility themselves without expecting the employer to take on the additional cost. I’m assuming no one wants pay cut for these percentages to help cover the additional costs? The business owners carry the risks of just surviving, as well as maintaining their staff. The governments have to stop bleeding them for the good of the economy as they are Australia’s largest employers. They are already under immense pressure.

  3. Mick Mccauley says:

    In the Super Guide Newsletter email it made the comment that “Eventually, employees will receive 12% SG, but not yet”. These sorts of incorrect statements often fuel unjustified expectation by the public when these policies are eventually discussed and implemented.

    The statement should have more correctly read that “Eventually, employees will contribute 12% SG, but not yet”. It is the employees money being contributed after all.

  4. There’s nothing really that great about this for anyone who was gets an annual pay increase. My increase was set to be 4.00%, however it’s now 3.75% with a 0.25% increase in super.

    I don’t want more money locked up until I’m ancient. And with at least 30 years until I can access my super I can assure you the Government will tinker with it some more and make it harder to access. I wouldn’t be surprised if I have to wait until I’m 70 to get at it.

    I’m opposed to SGC increases as it reduces my control over my money. Who want’s to work after 50??

    • Laurie J Mackeson says:

      While I prefer individuals to have more control to spend, save/invest their own money, I am very worried about how our society changes when you give people the right to now have enough and overly rely on #GovermentHandouts…

  5. It wasn’t such a pleasant surprise for me to find that my first pay packet of the new financial year has been reduced to fund the extra compulsory employer superannuation contributions.

  6. My employer has decided to reduce my salary to pay for this increase because I’m on a salary package. Is this ok, I have a feeling this is wrong?

  7. Fantastic article. Very clear and concise. Answered all the questions I had and more
    Thanks Trish

  8. Crinkles says:

    Just got an email from the company today. Will be taking a 0.25% haircut as this now has to go to super – with associated decrease in take home pay. Company says those earning less than $75k don’t take the haircut but those earning more do.

    Company says as we are above award there is nothing we can do. Still on individual contract from 2007. APESMA says company is in the wrong and they stand ready to act legally on my behalf.

    0.25% is not much but what about the future 2.75%? We’ll be paying for it ourselves.

  9. Eric Smith says:

    You do all realise that the 0.25% increase will be deducted from your pay and given to your nominated superannuation fund right?

    Unless you are a government employee, on the minimum age or your employer is very generous, expect to receive a pay cut of 0.25% from your gross pay. This is not what the Government publishes or wants private companies to do, but is powerless to stop. I’m certain companies such as Fujitsu and CSC (among countless others) will be conducting themselves in this manner.

    • FYI my large US based employer has decided to fund the .25% increase from July 1. Effectively a .25% pay rise all going into super. Shame all employers don’t do the same.

    • My understanding is that it depends on the wording of your employment contract. Is your contract for a total package? or is it for an amount + Super?

      • We received a company-wide email stating ‘we have decided to fully fund the .25% super guarantee increase’, which implies that it’s at the employer’s discretion & nothing to do with our employment contracts.

  10. My employer just sent out a comms saying this. In line with our current practice, will continue to meet our legal and contractual obligations by making superannuation contributions on your behalf from your Total Fixed Compensation (TFC). This will result in an increase in your superannuation contribution and a marginal decrease in your net take home pay.
    Is this legal???

    • Yes. My understanding is that it is legal. May depend on your employment contract. Is your contract for a total package? Or is it for an amount + Super?

  11. Hi Trish,

    My employer had advised that of the increase of their contribution to 9.25% on 1 July with a corresponding increase in my Total Renumeration Package.
    However they have advised that any further increases in the SG contribution will not result in an increase in my Total Renumeration Package, effectively meaning that the increases will be funded out of my salary.
    Is this how the increases in the SG supposed to work?

  12. awesome! My employer just sent email about this that he is going to increase from 9% to 9.5% from this july. So is it 9.25% instead of 9.5%?

    • Hi Damu
      The super laws only require 9.25% SG contributions from July 2013, but there is nothing stopping an employer contributing more than 9.25%. If you’re also planning to make your own super contributions, be aware that your employer’s contributions and any before-tax contributions you choose to make (that is, salary sacrifice arrangements) count towards the single concessional contributions cap. See SuperGuide website for more information.
      Regards
      Trish

  13. Albert Faure says:

    Great topics and commentary Trish ………………….keep it up.

    It’s a pity though that not all businesses will benefit from the lower coy tax rates, as a vast majority of small business enterprises are unencorporated, and are in the main sole traders or partnerships. This segement of business will still have to shoulder the impost of having to fund increases in SGC, without (as far as I can see) any offset benefit.
    Again great work…..always look forward to reading your Newsletters

  14. Dallas Achilles says:

    Hi Trish
    Thanks for all the valuable info that you provide.
    It is a great and much appreciated community service.

    In regards to the SG changes.
    There is a lot of hype about the figures 9% – 12%.
    But isnt it a fact that all these ‘concessional’ contributions are subject to a 15% contribution tax?
    This in real terms means that your 9% is actually 7.65%.
    Your 9.25% is actually 7.86%.
    Worse still the $50,000 cap on Concessional contributions is really $42500
    Your $25,000 cap is actually $21250.
    There is no mention of this in all the hype. Why?

    • Trent Thompson says:

      Dallas Achilles.

      Thant is a fantastic point that you raise on the topic. quite often people get side tracked and fixate on the trivial issues rather than the one that will actually have an impact on their lives.

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