Will scheduled Super Guarantee rate rises go ahead

Compulsory superannuation contributions are legislated to increase incrementally from 9.5% to 12% from next year, but debate is continuing on whether those rises will go ahead.

The Superannuation Guarantee (SG) is the minimum amount that an employer must pay into an employee’s super fund. It is currently 9.5% of gross salary.¹

That rate is currently scheduled to incrementally rise to 10% from 1 July 2021 and up to 12% by 1 July 2025.

The Australian Government has not announced any plans to change the legislation, however, due to a range of factors including the impact of the COVID-19 crisis, there is considerable lobbying and commentary pushing for a potential delay to this increase.

What is the current SG rate and schedule?

In 2012, the then Labor government introduced legislation, first announced in the 2010-2011 Federal Budget², to increase the SG gradually from 9% to 12%.

Under that change, the incremental increases to the SG rate were to be phased in from 1 July 2013 and reach 12% by 1 July 2019.

However, the Government subsequently delayed the increases and the rate was scheduled to stay at 9.5% until 2021 and reach 12% in 2025.³

SG scheduled rate rises

The SG is scheduled to rise by 0.50% each financial year as follows:

Source: Australian Taxation Office, 22 July 2020, Super Guarantee Percentage

SG increase review

In September 2019, the Government commissioned an independent review of the retirement income system.

The review⁴ looked into the three pillars of the retirement income system: a means tested Age Pension, compulsory savings through the SG, and voluntary savings including home ownership.

The review aimed to present a number of scenarios for reform and establish a “fact base to help improve understanding of how the Australian retirement income system is operating and how it will respond to an ageing society”, rather than make recommendations itself.

The review has been finalised and delivered to the Treasurer, but not yet released publicly.

What you can do now

There are a few steps you could take now to make sure your business is prepared for the increase if it continues to go ahead. These include:

1. Checking with your payroll provider on how the change will be made and if there are any costs.
2. If you have a Human Resources Information System (HRIS), are there any changes needed through this platform that you need to allow time for?
3. Identifying any key employee documents that reference the current rate and may need to be updated.

QSuper will keep you informed

The Government has not stated any plans to freeze the scheduled SG rate rises or change the scheduled introduction of the rises.

We will keep you updated on any potential changes as they happen.

We’re here to help

To find out more about the scheduled increase, contact our Employer Help Desk

1 If you earn $450 or more (before-tax) in a calendar month, your employer must pay super guarantee (SG) on top of your wage or salary. The standard SG rate is 9.5% of your ordinary time earnings (OTE) salary. Ordinary time earnings (OTE) salary is generally what you earn for your ordinary hours of work, including commissions, shift loadings and allowances, but not overtime payments. For more information, see ato.gov.au/super
2 Australian Government, Budget measures: budget paper no. 2: 2010–11, Commonwealth of Australia, Canberra, 2010, at >www.aph.gov.au
3 Australian Government, Minerals Resource Rent Tax Repeal and Other Measures Bill 2014, Commonwealth of Australia at www.parlinfo.aph.gov.au
4 Australian Government, Retirement income review, November 2019, at www.treasury.gov.au