The Superannuation Guarantee Levy rate is the amount that an employer is required to pay into a superannuation account on behalf of an employee.

The Superannuation Guarantee Levy is represented as a percentage of an employees’ wage.

Therefore, the higher the wage, the greater the amount that the employer must contribute – in dollar terms (subject to the maximum contribution base).

The Government has announced that the Superannuation Guarantee Levy will increase from 9% p.a. to 12% p.a. between 1 July 2012 and 30 June 2026.

Why is the Superannuation Guarantee Levy increasing?

The reason for the increase is undoubtedly due to the position the Government currently finds itself in. A significant portion of Government expenditure is allocated to funding the Old Age Pension.

And, things are set to get worse, as only the first batch of baby boomers have reached Age Pension age.

The reason why the Government contributes so much towards funding the Age Pension is because too many Australians have not saved for their own retirement and rely on the Government to fully or partially substitute their income to cover living expenses throughout retirement.

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Some of this can be attributed to the Government promising to fund the population’s retirement in exchange for increased taxes at the time – decades ago.

By increasing the Superannuation Guarantee Levy rate, most employees will effectively have their take-home wage reduced and a higher amount contributed to their superannuation account. I say effectively because employers are now offering salary packages inclusive of super, so that they are not impacted by a gradual increase in the SG Levy.

Higher Superannuation Contributions into employees’ accounts will result in less strain on the Government upon retirement of the employees, as it is intended they will have approximately 75% of their pre-retirement income able to be funded using their superannuation savings, which they are unable to access until a certain age.

What is the Superannuation Guarantee Levy?

As mentioned, the Superannuation Guarantee Levy is increasing over time. The relevant rates for each financial year are as follows:

Period Superannuation Guarantee Rate (Percentage %)
1 July 2003 – 30 June 2013 9%
1 July 2013 – 30 June 2014 9.25%
1 July 2014 – 30 June 2015 9.5%
1 July 2015 – 30 June 2016 9.5%
1 July 2016 – 30 June 2017 9.5%
1 July 2017 – 30 June 2018 9.5%
1 July 2018 – 30 June 2019 9.5%
1 July 2019 – 30 June 2020 9.5%
1 July 2020 – 30 June 2021 9.5%
1 July 2021 – 30 June 2022 10%
1 July 2022 – 30 June 2023 10.5%
1 July 2023 – 30 June 2024 11%
1 July 2024 – 30 June 2025 11.5%
1 July 2025 – 30 June 2026 12%

Employer SGC payments are only required to be paid on an employees wage up to the quarterly maximum superannuation contribution base. To read more about the limits, levels and dates associated with the maximum superannuation contribution base, click here.

Please click here for the 2017/18 Concessional Contribution cap (which includes all salary sacrifice and SG contributions)

Employer-Superannaution-Guarantee-Levy-Rate-Mandatory

Click here for more information on the Division 293 tax for high income earners.

 

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Chris Strano

Chris Strano is a specialist independent superannuation author for SuperGuy.com.au - one of Australia's leading superannuation information resources.

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