The path from 9.5% to 12%
The Superannuation Guarantee has been increasing in 0.5pp steps:
• 1 July 2014 - 30 June 2021: 9.5% (paused during the slow recovery) • 1 July 2021: 10.0% • 1 July 2022: 10.5% • 1 July 2023: 11.0% • : 11.5% • : 12.0% (FINAL legislated step)
The original Howard-era plan capped SG at 9%; Rudd raised the target to 12%. Coalition governments paused increases multiple times; the Albanese government kept the 2025 milestone intact.
How it shows up in your pay: SG is paid on top of your base salary (for most employment contracts). If your salary is "$80,000 plus super," your super went from $7,600 (9.5%) to $9,600 (12%) over the 5-year transition. If your contract is "$80,000 inclusive of super," your take-home pay actually dropped slightly each year as more of the package was diverted to super.
What 12% means in dollars
Annual SG contribution by salary (12% rate, 2026): • $50,000: $6,000 • $70,000: $8,400 • $90,000: $10,800 • $120,000: $14,400 • $150,000: $18,000 • $200,000: $24,000 • $250,000: capped at $30,000 (the MSCB - Maximum Superannuation Contribution Base - is $73,030/quarter in 2025-26, which works out to ~$292K/yr; over that, SG isn't compulsory)
Compare to 2020 (9.5% rate): a $90,000 employee got $8,550/yr in 2020 super, now gets $10,800. That's an extra $2,250/year compounding inside super.
Concessional cap interaction: total concessional contributions (SG + salary sacrifice + personal deductible) are capped at $30,000/year in 2025-26 (up from $27,500). A $200K employee already gets $24K in SG - leaves only $6K of cap for additional sacrifice. Higher earners are increasingly cap-constrained.
| Effective date | SG rate | Annual SG on $90K |
|---|---|---|
| 1 July 2014 - 30 June 2021 | 9.5% | $8,550 |
| 1 July 2021 | 10.0% | $9,000 |
| 1 July 2022 | 10.5% | $9,450 |
| 1 July 2023 | 11.0% | $9,900 |
| 11.5% | $10,350 | |
| (final) | 12.0% | $10,800 |
| Salary | SG @ 12% | Extra vs 9.5% |
|---|---|---|
| $50,000 | $6,000 | +$1,250 |
| $70,000 | $8,400 | +$1,750 |
| $90,000 | $10,800 | +$2,250 |
| $120,000 | $14,400 | +$3,000 |
| $150,000 | $18,000 | +$3,750 |
| $200,000 | $24,000 | +$5,000 |
| $292,000 (MSCB) | $35,040 | +$7,300 |
The compound effect: $200K extra by age 60
The real value of the SG increase shows up over decades.
Scenario: 30-year-old earning $80,000, retires at 60
Under old 9.5% rate: • Annual SG: $7,600 • 30 years of $7,600 + 5% real wage growth + 7% real super return • Balance at 60: ~$680,000 (today's dollars)
Under new 12% rate: • Annual SG: $9,600 • Same growth + return assumptions • Balance at 60: ~$885,000 (today's dollars)
Extra balance from SG increase alone: ~$205,000 at retirement.
What does $205K extra mean in retirement income? Using the 4% safe withdrawal rate, that's an extra $8,200/year of inflation-adjusted income for 30 years - the difference between a comfortable retirement and a financially-stretched one.
For younger workers (under 25): even more compounding. A 23-year-old on $60K could see $280K-$350K more at age 60.
For older workers (50+): less time for compounding. A 50-year-old on $90K might get an extra $30-$45K by 60 - still meaningful but not transformative.
Self-employed: do you need to pay yourself 12%?
Short answer: no. The SG only applies if you're an employee. If you're a sole trader (ABN, no company), you have no legal requirement to contribute super at all.
But you should. Self-employed Australians have ~25% lower super balances at retirement than employees, even at the same income levels. The fix: voluntary concessional contributions.
Tax math for self-employed concessional contribution: • Contribute $10,000 to super • Claim deduction on tax return • Saved tax at marginal rate (e.g. 37% = $3,700) • Super contributions tax: 15% × $10,000 = $1,500 • Net benefit: $3,700 - $1,500 = $2,200 in your pocket for $10K parked in super
Use a registered super fund or your own SMSF. Submit a "Notice of Intent to Claim a Deduction" form to your super fund before lodging your tax return.
Sole trader running through a company: if you're an employee of your own Pty Ltd company drawing a wage, the company MUST pay you 12% SG. Many small business owners take dividends instead of wages to skip SG - this is legal but reduces your retirement balance.
What's next: division 296 and the $3M cap
The 12% SG is the final rate increase, but super policy is not standing still. The biggest upcoming change is Division 296 - colloquially "the $3M cap" or "Treasury's big-balance super tax."
Division 296 details (legislation passed late 2024, effective 1 July 2025): • Applies to total super balances above $3 million • Additional 15% tax on earnings attributable to the portion above $3M • Brings total effective tax on those earnings to 30% (existing 15% + new 15%)
Who's affected: roughly 80,000 Australians (top ~0.5% of super balances). Most under-50 workers will never hit $3M - but for high earners with SMSFs, this is a major planning event.
Controversial element: unrealised gains are taxable under Div 296. So a property in your SMSF that rose in value (but hasn't been sold) triggers tax - a first for Australian tax policy. Many planners are advising clients to crystallise capital gains before 1 July 2025 and rebalance to smaller balances.
What about you (sub-$3M): nothing changes. Your SG, voluntary contributions, and earnings tax all stay at existing rates.
Run the math for your situation
Use our 🇦🇺 Australia calculator to plug in your own numbers.