Superannuation guarantee rate to increase to 10.5%

With the Federal Budget handed down on Tuesday 29 March, we can now be confident the Superannuation Guarantee increase will go ahead.

With the Federal Budget handed down and no changes announced to the recently legislated increase of the Superannuation Guarantee rate to 10.5%, we can now be confident it will go ahead from 1 July 2022.

Shifting the focus back to the future

Although 2020 and 2021 proved challenging, and with 2022 off to a shaky start following the continually evolving Russia-Ukraine crisis, the decision to proceed with the Superannuation Guarantee (SG) rate increase is a vote of confidence in our continued economic recovery.

The increase to the SG rate means most Australian employees will enjoy the extra 0.5% increase, which will go directly towards increasing super balances – another step towards helping Australians retire with more money.

Implementing the changes

The additional super will be generated from employer contributions and similar to last year’s increase from 9.5% to 10%, some businesses may seek to recover some or all of the 0.5% from employee remuneration costs – for example, by an offset to salary increases or for those on total cost remuneration packages, by reducing take home pay.

The implementation of the 0.5% increase will be managed by individual employers and may be calculated as per your employment contract. Employers will be working behind the scenes over the next couple of months to determine how this will work and we anticipate they will communicate with you directly, before 30 June 2022.

For employees who already receive 10.5% or more, an increase may not be required, depending on their employment agreements.

What the future might hold for super

Increasing the SG rate has been on the agenda for a long time, with legislation to increase the rate to 12% by 1 July 2025 already passed.

The economic downturn caused by COVID-19 fuelled speculation that the original increase in the SG rate from 9.5% to 10% would be delayed, however this didn’t eventuate. With the increase to 10.5% now going ahead, we continue to appear to still be on track with the current schedule, as shown below:

Financial Year	Super Guarantee Rate
1 July 2002 – 30 June 2013	9%
1 July 2013 – 30 June 2014	9.25%
1 July 2014 – 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 onwards	12%

Source: Australian Taxation Office, 2021

A little can go a long way

Although an increase of 0.5% to the SG rate may sound small, over the long term, even a small amount can have a significant impact on your balance.

To help illustrate this, you can use the Mercer Retirement Income Simulator, which will help you understand what your retirement income could look like, how long it might last and how adding a little extra can have a significant impact over the long term.