The legislated rise of the superannuation guarantee (SG) rate to 12% on 1 July 2025 marks the final step in a phased increase that began on 1 July 2014, when the rate was 9.5%. The Superannuation Guarantee (Administration) Act 1992 sets the minimum percentage of an employee’s ordinary time earnings (OTE) that an employer must contribute to a complying superannuation fund. The rate moved through 10% (1 July 2021), 10.5% (1 July 2022), 11% (1 July 2023), and 11.5% (1 July 2024). The 1 July 2025 increment to 12% is not a proposal or a budget-night announcement subject to legislative uncertainty; it is current law.
The Australian Taxation Office (ATO) enforces SG compliance through the Single Touch Payroll (STP) system, data-matching with super funds, and the Super Guarantee Charge (SGC) regime for late or short-paid contributions. For employers, the 0.5-percentage-point increase alters quarterly payroll calculations, award and enterprise agreement interpretation, salary-packaging arrangements, and contractor classification decisions. For employees, the change lifts the minimum flow of compulsory savings into their retirement accounts, affecting take-home pay where total remuneration packages absorb the SG cost. The 2025 rate is the terminal rate under the Superannuation Guarantee (Administration) Act 1992 unless a future parliament amends the legislation.
Calculation of the 12% Rate and Ordinary Time Earnings
Definition of Ordinary Time Earnings
Ordinary time earnings are what an employee earns for their ordinary hours of work, including over-award payments, commissions, shift loadings, and allowances, but excluding overtime payments. The ATO’s Superannuation Guarantee Ruling SGR 2009/2 (updated to reflect subsequent rate changes) provides the detailed definition. For the quarter beginning 1 July 2025, the minimum SG contribution for an eligible employee is calculated as:
SG contribution = OTE × 12%
An employee earning OTE of $80,000 per annum requires a minimum annual SG contribution of $9,600 ($80,000 × 0.12), equating to $2,400 per quarter. An employee on a $1,200 weekly OTE requires a minimum weekly SG contribution of $144.00.
Maximum Contribution Base
The maximum contribution base for the 2025–26 financial year is set by the ATO and indexed to average weekly ordinary time earnings. For the 2024–25 year, the base is $65,070 per quarter. Employers are not required to pay SG on OTE above this threshold. The 2025–26 maximum contribution base will be published by the ATO in early 2025. Employers should monitor ATO updates and adjust payroll systems accordingly.
Salary Sacrifice and Total Remuneration Packages
Where an employee has a total remuneration package expressed as a fixed dollar amount inclusive of SG, the employer may absorb the rate increase by reducing the employee’s take-home pay, provided the employment contract permits it. The ATO’s guidance “Super Guarantee and salary sacrifice arrangements” (updated 26 June 2024) confirms that an effective salary sacrifice arrangement requires a pre-existing agreement and must not reduce an employee’s OTE below the minimum required for SG purposes. Employers reviewing contracts before 1 July 2025 should check whether the package is stated as “base plus SG” or “total package inclusive of SG,” as the latter structure shifts the cost of the rate rise to the employee.
Employer Compliance Obligations From 1 July 2025
Quarterly Payment Deadlines and the Super Guarantee Charge
SG contributions must be received by the employee’s super fund by the quarterly due date. The deadlines for the 2025–26 year are:
- Quarter 1 (1 July – 30 September 2025): 28 October 2025
- Quarter 2 (1 October – 31 December 2025): 28 January 2026
- Quarter 3 (1 January – 31 March 2026): 28 April 2026
- Quarter 4 (1 April – 30 June 2026): 28 July 2026
If an employer misses the deadline or pays less than the 12% minimum, the employer must lodge an SGC statement and pay the SGC. The SGC comprises the SG shortfall amount, interest at 10% per annum (as at the ATO’s published rate for the 2024–25 year, subject to quarterly revision), and an administration fee of $20 per employee per quarter. SGC payments are not tax-deductible, unlike on-time SG contributions.
Single Touch Payroll Reporting
From 1 July 2025, STP-enabled payroll software must report SG contributions at the 12% rate. Employers using STP Phase 2 reporting must include year-to-date OTE and SG amounts in each pay event. The ATO cross-references STP data with super fund transaction reports to identify discrepancies. Employers should ensure their payroll software is updated with the 12% rate before the first pay run of the 2025–26 financial year. Major payroll providers typically release rate updates in May or June, but employers remain responsible for verifying the configuration.
Contractor Classification and SG Eligibility
The SG regime extends to contractors who are engaged wholly or principally for their labour. The ATO’s “Employee or independent contractor” decision tool and the High Court decisions in CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 have sharpened the distinction. If a contractor is deemed an employee for SG purposes, the 12% rate applies to their OTE from 1 July 2025. Employers engaging contractors should review written agreements and actual working arrangements before the rate change to avoid retrospective SGC liabilities.
Interaction With Award and Enterprise Agreement Obligations
Modern Awards and the 12% Rate
Most modern awards express superannuation entitlements by reference to the SG rate rather than a fixed percentage. The Fair Work Commission’s standard superannuation clause states that the employer must make contributions “in accordance with the Superannuation Guarantee (Administration) Act 1992.” For these awards, the rate automatically increases to 12% on 1 July 2025 without the need for a variation application. Employers should verify the wording of each applicable award; a minority of older awards or enterprise agreements may specify a fixed percentage that could fall below the new statutory minimum, in which case the statutory minimum overrides the instrument.
Enterprise Agreements and BOOT Implications
Enterprise agreements that set a fixed superannuation rate below 12% will, from 1 July 2025, contravene the National Employment Standards (NES) to the extent of the shortfall. The Fair Work Act 2009 (Cth) s.56 provides that an enterprise agreement must not exclude the NES, and any term that does so has no effect. Employers with such agreements face a choice: voluntarily pay the 12% rate (the shortfall as an over-award payment) or apply to vary the agreement. The Better Off Overall Test (BOOT) assessment for new agreements lodged after 1 July 2025 will use 12% as the baseline.
Payroll System Configuration and Audit Trails
Employers should retain records showing OTE, SG amounts, fund details, and payment dates for at least five years. The ATO’s “Record keeping for employer super contributions” guidance (updated 1 July 2024) specifies that electronic records must be in a format that can be readily accessed and printed. A payroll audit trail that logs the rate change from 11.5% to 12% on 1 July 2025 is a key control for demonstrating compliance during an ATO review.
Implications for Employees and Retirement Savings
Impact on Take-Home Pay
For an employee on a $70,000 OTE, the 0.5-percentage-point increase adds $350 per annum in compulsory super contributions. Where the employee’s remuneration is a “base plus SG” structure, this additional $350 is a cost borne by the employer and does not reduce take-home pay. Where the employee is on a total remuneration package inclusive of SG, the $350 is effectively redirected from take-home pay to super. Employees should check their employment contracts and payslips for the pay period ending on or after 1 July 2025 to confirm the employer is applying the correct rate.
Concessional Contributions Cap Interaction
The concessional contributions cap for the 2025–26 financial year is $30,000 (indexed from the 2024–25 cap of $30,000, subject to final ATO confirmation). SG contributions count towards this cap. An employee earning $250,000 OTE receives $30,000 in mandatory SG contributions at the 12% rate, fully exhausting the cap. Employees whose total concessional contributions exceed the cap face excess concessional contributions tax at their marginal rate plus the Medicare levy, less a 15% offset. The ATO’s “Excess concessional contributions” framework (updated 1 July 2024) allows individuals to release up to 85% of excess contributions from super, but the tax treatment remains punitive. High-income earners should review salary sacrifice arrangements before 1 July 2025 to avoid breaching the cap.
Stapled Funds and Choice of Fund
The ATO’s “Your Future, Your Super” stapling rules remain in effect. Where an employee does not make a choice of fund, the employer must request the employee’s stapled fund details from the ATO. The rate increase does not alter the stapling obligation, but employers onboarding new employees after 1 July 2025 must ensure the 12% contribution is directed to the correct fund. The ATO’s stapled fund request service is available through ATO Online Services for employers.
Actionable Steps for Employers and Employees
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Employers: update payroll software and test the 12% rate before 30 June 2025. Run a dummy pay run for the first pay period of July 2025 to verify that OTE × 12% calculates correctly and that STP reporting reflects the new rate. Confirm that the software provider has released the 2025–26 rate update and that the maximum contribution base is current.
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Employers: review all employment contracts and contractor agreements. Identify total-remuneration-package contracts that may shift the cost of the 0.5% increase to the employee. For contractor arrangements, apply the ATO’s worker classification tool to assess SG exposure and document the reasoning. Engage legal or payroll advisory support where classification is ambiguous.
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Employers: audit enterprise agreements for fixed superannuation rates. If an agreement specifies a rate below 12%, prepare to pay the shortfall voluntarily from 1 July 2025 and budget for the additional cost. Initiate a variation application through the Fair Work Commission if a permanent fix is required.
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Employees: check the first payslip after 1 July 2025. Confirm the SG line item shows 12% of OTE. If the employer uses a total-remuneration-package structure, verify that the super component has increased and understand the effect on net pay. Contact the ATO if contributions are short-paid or late.
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Advisers and payroll professionals: subscribe to ATO employer updates. The ATO publishes quarterly SG rate reminders and compliance guidance. Key resources include the “Super guarantee contributions” webpage, the SGC statement and calculator tool, and the STP Phase 2 employer reporting guidelines. Monitor the ATO website for the 2025–26 maximum contribution base and any legislative instruments that refine the OTE definition.