What is the prescribed superannuation guarantee rate payable?

superannuation guarantee rate proposals piggy bank on pile of cash money

This superannuation guarantee rate changes were proposed in the 2014 Federal Budget. The Government has amended the program for increasing the superannuation guarantee rate (the SG Rate) to 12%. It should not be unexpected that further changes could be introduced if a government with a different superannuation guarantee agenda is elected.

The superannuation guarantee system was introduced in 1992: for more detail on that system, refer our article ‘Superannuation guarantee matters‘. The ‘rate’ applies to the ordinary times earnings of ’employees’.

The original intention of the government was that the SG rate would rise to 9.5% from 1 July 2014 and remain at this level until 30 June 2018. Beyond that date, the government announced that the SG rate would then increase by 0.5% each year from 1 July 2018 until it reaches 12% in the 2022/23 financial year.

This rate of increase was revised lower in late 2015, so that the Table below now reflects the SG rates to apply in the relevant years:

Financial Year Revised Rate Original Rate
2014/15 9.50% 9.50%
2015/16 9.50% 9.50%
2016/17 9.50% 9.50%
2017/18 9.50% 9.50%
2018/19 9.50% 10.00%
2019/20 9.50% 10.50%
2020/21 9.50% 11.00%
2021/22 10.00% 11.50%
2022/23 10.50% 12.00%
2023/24 11.00% 12.00%
2024/25 11.50% 12.00%
2025/26 12.00% 12.00%

Why is the superannuation guarantee rate so important?

The intention of the Australian Superannuation system is to provide a reliable source of income to fund a reasonable level of financial independence in retirement. This system has two advantages: it improves the well-being of the retired population to be less dependant on government welfare in retirement; and that means that future scarce tax resources will be able to service other public health and welfare needs more adequately.

Whilst it was always recognised that the previous long-term rate of 9.00% (that had applied for a number of years, after slowly increasing from the original 3%) would not be adequate, there is a higher expectation that the 12% rate will be more effective in satisfying the above goals.

As was demonstrated in our article ‘Dollar Cost Averaging’, the earlier a start is made for a savings/ investment accumulation plan, the more likely the goal will be met. It is still important however, to monitor the way that these funds are invested, to ensure that the member is comfortable with the level of investment risk they are exposed to through their superannuation account.

Are you managing your superannuation wisely?

There are a number of aspects to the wise management of your superannuation investment: these include –

  • ensuring contact details are notified up-to-date with the trustee(s) of your account(s);
  • wherever practical, amalgamate all of your accounts into one (carefully selected) provider account;
  • check that the superannuation guarantee contributions made by your employer are added regularly;
  • review any insurance products within the account(s) are adequate and suited to your circumstances;
  • ensure that you advise the trustee as to your death benefit nomination(s); and
  • regularly review your investor risk profile and check that your superannuation is invested in an asset allocation within your ‘comfort zone’.

The experienced advisers and support team at Continuum Financial Planners Pty Ltd are ready and able to assist you with these processes, regardless of which superannuation structure your retirement savings are held: to access the team, call our office on 07-3421 3456; or complete the Contact Us form on our website and we’ll follow you up promptly and courteously.

(This article was originally posted in May 2014: it has been refreshed as required, most recently in August 2016.)