The Superannuation Guarantee rate remains at 9.5% for the 2017/2018 financial year (and also remained at 9.5% for the 2016/2017 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.
Superannuation Guarantee contributions are compulsory employer superannuation contributions paid to eligible employees (to find out who is an eligible employee, see text immediately below the first table).
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 year||SG Rate|
|2013 / 2014||9.25%|
|2014 / 2015||9.5%|
|2015 / 2016||9.5%|
|2016 / 2017||9.5%|
|2017 / 2018||9.5%|
|2018 / 2019||9.5%|
|2019 / 2020||9.5%|
|2020 / 2021||9.5%|
|2021 / 2022||10.0%|
|2022 / 2023||10.5%|
|2023 / 2024||11.0%|
|2024 / 2025||11.5%|
|2025 / 2026||12.0%|
Superannuation Guarantee is the official term for compulsory superannuation contributions made by employers on behalf of eligible 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 time earnings for the 2017/2018 year (as is the case for the 2016/2017 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). For more information on how the SG rules works, including who is eligible, see SuperGuide article Superannuation and employees: 10 facts about your super entitlements.
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?
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
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 year||Current SG rates|
|Old SG rates|
|2012 / 2013 (starts 1 July 2012)||n/a||9.0%|
|2013 / 2014||n/a||9.20%|
|2014 / 2015 (starts 1 July 2014)||9.5%||9.5%|
|2015 / 2016||9.5%||10.0%|
|2016 / 2017||9.5%||10.5%|
|2017 / 2018||9.5%||11.0%|
|2018 / 2019||9.5%||11.5%|
|2019 / 2020 (starts 1 July 2019)||9.5%||12.0%|
|2020 / 2021||9.5%||12.0%|
|2021 / 2022 (starts 1 July 2021)||10.0%||12.0%|
|2022 / 2023||10.5%||12.0%|
|2023 / 2024||11.0%||12.0%|
|2024 / 2025||11.5%||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
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 6 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 (reducing tax rate to 28.5% from 30%), applicable to businesses with a turnover of less than $2 million.
Note: The Liberal government’s original plans were, that from 1 July 2016, the small business corporate tax rate would 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 would 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 would gradually increase to $1 billion by from 1 July 2022. From 1 July 2023, all companies would be subject to the 27.5% tax rate, which dropped to 27% for the 2024/2025 year, and then 26% for the 2025/2026 year and then 25% for the 2026/2027 year.
Company tax rate cut update: On 31 March 2017, the federal treasurer, Scott Morrison, issued a media release, confirming that parliament had agreed to(but not yet legislated) that from 1 July 2016, the small business corporate tax rate would drop to 27.5% for businesses with an aggregated annual turnover of less than $10 million, and from 1 July 2017, the corporate tax rate of 27.5% (rather than 30%) would apply to businesses with an aggregated annual turnover of $25 million or less, and from 1 July 2018, the 27.5% tax rate will apply to businesses with an aggregated annual turnover of $50 million or less. From 1 July 2024, the tax rate will drop to 27% for businesses with an aggregated annual turnover of $50 million or less, and from 1 July 2025, the tax rate will drop to 26%, and from 1 July 2026, the tax rate will drop to 25%. Any business with an aggregated annual turnover of more than $50 million will continue to pay 30% income tax.