Super guarantee: What you need to know about the 12% rate

Published Thursday 18 December 2025

Table of contents

• What is the superannuation guarantee?
• Who is eligible for super guarantee?
• Understanding the 2025 SG rate increase
• Key dates and deadlines for employers
• Calculating super contributions and the maximum base
• Impact of super guarantee increase on employers
• Practical steps for employers
• Managing super guarantee changes with confidence
• FAQs on 2025 superannuation guarantee changes

Key takeaways

• Calculate the financial impact of July 2025's 0.5% increase on your business by reviewing employee contracts and adjusting budget forecasts, especially for employees on plus super arrangements where you now bear the additional cost.
• Ensure superannuation contributions reach employees' funds within 28 days after each quarter end to avoid the super guarantee charge, which includes 10% annual interest and a $20 administration fee per employee.
• Communicate the rate change clearly to employees, particularly those on total package contracts who see reduced take-home pay as more money goes to their superannuation fund.

What is the superannuation guarantee?

Superannuation guarantee (SG) is the mandatory retirement savings system that requires Australian employers to contribute at least 12% of eligible employees' ordinary time earnings to their super fund. The ATO oversees this system to ensure all working Australians build retirement savings.

Employers must contribute based on ordinary time earnings (OTE), which includes:

• Base salary and wages: Regular pay for standard work hours
• Bonuses and commissions: Performance-based payments
• Allowances and loadings: Additional payments that form part of regular earnings
• Excluded earnings: Overtime payments are not subject to super guarantee

Who is eligible for super guarantee?

As an employer, you need to pay super for all eligible employees.

An employee is generally eligible for super guarantee contributions, regardless of how much they are paid, if they are over 18 years old. If your employee is under 18, you'll need to pay their super if they work more than 30 hours in a week.

These rules typically apply to your full-time, part-time, and casual employees.

Understanding the 2025 SG rate increase

The super guarantee rate increased to 12% on 1 July 2025. This completed the scheduled rate increases:

• 2022-23: 10.5%
• 2023-24: 11%
• 2024-25: 11.5%
• 2025 onwards: 12% (maintained until at least 2028)

The super guarantee change in 2025 means that for every $100 of OTE, you contribute $12 to your employees' superannuation retirement fund.

Key dates and deadlines for employers

The 12% rate applies to all ordinary time earnings paid from 1 July 2025 onwards, regardless of when the work was performed.

Quarterly payment deadlines help you stay compliant. You must ensure super contributions reach the fund within 28 days after each quarter end. The first payment under the new rate was due 28 October 2025.

If contributions reach the fund after the deadline, the ATO may apply the super guarantee charge, which includes 10% annual interest and an administration fee of $20 per employee, per quarter.

Employers must ensure the contributions are in the super fund by the deadline. It's not enough to process or send them by that date.

Calculating super contributions and the maximum base

Calculating SG contributions

SG contribution formula:

Ordinary time earnings × 12% = Required super contribution

Example calculation:

• Employee earns $5,000 per month in OTE
• Super contribution: $5,000 × 12% = $600 per month
• Quarterly contribution: $600 × 3 = $1,800

Identifying the maximum super contribution base

Based on the ATO's income limit for 2025–26 of $62,500 per quarter, maximum super contributions are capped at $7,500 per employee per quarter.

• This cap applies when employees earn more than $62,500 per quarter ($250,000 annually)
• You're not required to pay super on earnings above this threshold
• Voluntary contributions above the minimum are allowed

Here's more information from the ATO about key super rates and thresholds.

Impact of super guarantee increase on employers

The rate increase from 11.5% to 12% means higher super costs for every employee. For someone earning $100,000 annually, your contribution increases from $11,500 to $12,000 per year.

Automated payroll systems handle the update seamlessly:

• Xero users: Rate updated automatically on 1 July 2025
• Manual payroll: Update your spreadsheets as of your first July pay run
• Other software: Check with your provider about automatic updates

Contract type determines how the rate increase affects employee pay:

• Total package contracts: Employees receive less take-home pay as more goes to super
• Plus super contracts: Employee pay stays the same, but your costs increase by 0.5%

Communicate these changes clearly to employees and review contracts, salaries and wages to accommodate the increase.

Employees with plus super contracts have the same take-home pay. So the SG rate increase is an additional cost on top of their base salary.

The small 0.5% increase can add up over time, especially if you have several employees. Updating your forecasts to reflect the higher super contribution can help you manage cash flow for 2025 and beyond.

For example, if you have five employees on a plus super payment package earning $100,000, the increase from 11.5% to 12% is $500 per employee, per year. So you need to factor $2,500 into your annual budget and cash flow projections.

Here's more information from the ATO about how much super to pay.

Practical steps for employers

Communicate with employees

Make sure employees know about the change, especially those on inclusive packages. Use email, call a meeting, or send an internal newsletter to explain the increase, when it started, how it benefits their retirement, and who to contact with questions.

Review cash flow planning

Estimate the extra cost of the 0.5% increase and adjust budget and cash flow forecasts for 2025 and 2026.

Consider payroll software solutions

Xero automates SG calculations and super payments, integrates with SuperStream for easy reporting, and helps you meet ATO SG requirements. It also supports future changes like payday super: a change from 1 July 2026 that, according to the Treasury, will require employers to pay super with every pay cycle instead of quarterly.

Seek professional advice

Consult an accountant or bookkeeper for personalised advice, especially for complex contracts. They can help you stay compliant.

Here's a list of accountants and bookkeepers in Australia.

Managing super guarantee changes with confidence

Staying on top of super guarantee changes doesn't have to be stressful. When you understand your obligations and prepare your payroll in advance, you can manage the transition smoothly. If you use smart accounting software, it automates these calculations, saving you time and giving you peace of mind.

Use Xero to stay ahead of superannuation changes, improve payroll efficiency, and ensure ATO compliance. Try Xero for free to get started.

FAQs on 2025 superannuation guarantee changes

Common questions about the 2025 super guarantee rate increase.

When does the super guarantee rate increase to 12%?

The superannuation guarantee rate increased to 12% on 1 July 2025. The new rate applies to all ordinary time earnings (OTE) paid on or after that date, regardless of when employees completed the work.

What happens if I don't update my payroll system for the new rate?

You need to update your payroll system to the new 12% rate to meet your employer super obligations. If you do not, the ATO may charge you a super guarantee charge (SGC), which includes the amount you should have paid, 10% annual interest and a $20 administration fee per employee, per quarter.

You may also incur other penalties if you don't pay the SGC or don't pay into your employees' superannuation fund by each quarterly deadline. So it's essential to ensure your payroll software is up-to-date for the 12% super guarantee increase.

Do I need to pay super on overtime hours?

No, you don't need to pay superannuation on overtime hours as they are not ordinary time earnings (OTE). However, you will still make super contributions on allowances, loadings, and commissions if they are part of OTE.

How will payday super affect my business in 2026?

Payday super may come into effect 1 July 2026, depending on a final government decision. This new measure would require employers to pay superannuation contributions with every payroll rather than quarterly.

Think about how you will adjust your cash flow and payroll processes if the new ATO superannuation rules come into effect.

What is the maximum super contribution base for 2025-26?

The maximum super contribution base for 2025-26 is $62,500 per quarter. This means the maximum SG payment you need to make per employee is $7,500 per quarter.

The ATO sets this limit to cap the earnings subject to super contributions. Employers do not need to pay super on any earnings that exceed this quarterly threshold.

Does the increase affect employees on 'super inclusive' salary packages?

Yes. When the total remuneration package stays fixed, employees receive less take-home pay as a higher portion goes to their superannuation fund. You can review and increase the total package to find a fair payment plan that considers the super guarantee rate increase. Clear communication with employees on super inclusive packages is vital for transparency.