Superannuation Guarantee Contribution Rate

The Superannuation Guarantee (SG) contribution rate is the minimum percentage of an employee’s earnings that an Australian employer must pay into a complying superannuation fund, over and above wages. It is set under the Superannuation Guarantee (Administration) Act 1992 and administered by the Australian Taxation Office (ATO).

For the 2026-27 financial year the rate is 12%. That figure is the endpoint of a schedule of legislated increases that began at 3% in 1992 and stepped up annually in recent years – 10% in 2021-22, 10.5% in 2022-23, 11% in 2023-24, 11.5% in 2024-25 – reaching 12% on 1 July 2025. No further increase is currently legislated, so the rate is stable for the first time in several years, and any future change would require new legislation.

The rate, however, is now the least interesting part of the obligation. From 1 July 2026, the reforms known as Payday Super changed what the 12% is calculated on, when it has to be paid, and what happens when it is late. Employers whose systems were built around the old quarterly model are the ones most exposed.

What the 12% is calculated on

Until 30 June 2026, SG was calculated on ordinary time earnings (OTE) – broadly, what an employee earns for their ordinary hours, excluding most overtime.

From 1 July 2026, the base is qualifying earnings (QE), a broader concept that consolidates OTE with additional payment types brought into scope by the Payday Super legislation. The practical consequence is that pay components which previously sat outside the calculation may now attract SG, and the treatment turns on what a payment is actually for rather than on the label it carries in payroll. Any employer that mapped its pay codes to OTE and left them untouched should treat that mapping as out of date.

Earnings are capped by the maximum contribution base, which also changed shape on 1 July 2026: it is now an annual figure rather than a quarterly one. For 2026-27 it is $270,830, derived from the concessional contributions cap of $32,500 multiplied by 100 and divided by the 12% charge percentage, rounded down to the nearest $10. Once an employee’s qualifying earnings reach that figure within a financial year, no further SG is compulsory for that employee, capping the mandatory annual contribution at roughly $32,500. An award, enterprise agreement, or employment contract may still require more.

The shift from a quarterly to an annual cap matters most for high earners and for anyone with irregular pay – a large bonus that would once have breached a single quarter’s cap is now measured against the year.

When it has to be paid

This is the substance of Payday Super. Employers must ensure SG contributions are received by the employee’s fund within seven business days of payday, rather than within 28 days of the end of a quarter.

Two details do most of the damage in practice. The first is that the test is receipt, not dispatch – the money has to land in the fund, so any clearing house or gateway processing time has to fit inside the seven days, not sit alongside it. The second is that the obligation attaches to every payday, so a fortnightly payroll now carries twenty-six separate compliance events a year instead of four. A limited set of exceptions applies, including a grace period for newly hired employees.

What happens when a payment is late

Missing the deadline triggers the Superannuation Guarantee Charge (SGC), now assessed per payday. It comprises:

• the SG shortfall – the contribution that should have reached the fund
• notional earnings – interest at the ATO’s general interest charge rate, compounding daily from the qualifying earnings day
• an administrative uplift of up to 60% of the combined shortfall and notional earnings, replacing the former flat $20-per-employee administration fee. It can be reduced, in some cases substantially, for employers with a clean compliance record over the preceding 24 months or who make a prompt voluntary disclosure
• a choice loading of 25% of the relevant contributions where choice-of-fund rules were not followed
• further late payment penalties if the assessed charge is not paid within 28 days of the ATO’s notice

One change works in employers’ favour: deductibility has been reversed. Under the old regime the entire SGC was non-deductible. From 1 July 2026 the core components – shortfall, notional earnings, and administrative uplift – are deductible, while general interest charge accruing on an unpaid assessment and the late-payment penalties are not.

The uplift is what turns a modest oversight into a serious liability, and because the ATO data-matches Single Touch Payroll reporting against fund records, late contributions surface without an employee complaint. Unpaid SGC can also attract a Director Penalty Notice, making directors personally liable. The ATO has signalled a risk-based, facilitative approach during the first year of the regime, focusing on higher-risk employers rather than genuine one-off errors – but that is an enforcement posture, not a change to the law.

Who SG is payable for

SG is payable for employees regardless of how much they earn; the former $450 monthly earnings threshold was abolished on 1 July 2022. Employees under 18 must work more than 30 hours in a week to qualify. Contractors paid wholly or principally for their labour are treated as employees for SG purposes, which is a recurring classification risk for businesses that engage individuals through contracts for service.

Separately, from 1 July 2025 the government pays superannuation at the 12% rate on government-funded Paid Parental Leave, remitted by the ATO rather than by the employer.

Payroll implications

The 12% rate is easy. The compliance risk sits in the machinery around it: whether pay codes have been remapped from ordinary time earnings to qualifying earnings, whether the payment pipeline reliably clears within seven business days of every payday, whether failed contributions caused by incorrect member details are detected and reprocessed inside that window, and whether the annual maximum contribution base is tracked correctly for high earners.

Rejections deserve particular attention. A contribution bounced back by a fund for incomplete employee details has not been received, and the SGC clock keeps running – which means someone has to own the exception queue and clear it in days rather than at month-end.

Mercans provides managed payroll, EOR, and global payroll technology in Australia and more than 160 countries, calculating SG on the correct qualifying earnings base, tracking the annual contribution cap, meeting Payday Super settlement windows, and managing fund rejections and Single Touch Payroll reporting – so timing failures are resolved before they become an assessed charge.

Frequently asked questions

What is the Superannuation Guarantee rate for 2026-27?

12% of qualifying earnings. The rate reached 12% on 1 July 2025 as the final step of the legislated schedule and is unchanged for 2026-27, with no further increases currently legislated.

Has the rate changed under Payday Super?

No. Payday Super changed the timing of payments, the earnings base, the maximum contribution base, and the penalty regime – but not the 12% rate itself. Employers who read the reform as purely an administrative timing change tend to miss the earnings-base and cap changes that accompanied it.

How quickly must super be paid now?

Contributions must be received by the employee’s fund within seven business days of payday. Because the test is receipt rather than payment, clearing house and banking processing time has to be accommodated within that window, and a limited grace period applies for new employees.

Is superannuation payable on overtime?

Under the previous ordinary time earnings base, most overtime was excluded. The move to qualifying earnings from 1 July 2026 broadened what is included, and the treatment depends on the character of the specific payment rather than on how it is labelled in payroll. Employers should verify each pay component against current ATO guidance rather than relying on pre-2026 mappings.

What is the maximum super an employer must pay for one employee?

Compulsory SG is capped by the annual maximum contribution base, which is $270,830 for 2026-27, giving a maximum required contribution of approximately $32,500 for the year. Once an employee’s qualifying earnings reach the base, no further SG is compulsory for that financial year – though an award, enterprise agreement, or contract may require more.

What happens if a contribution is rejected by the fund?

A rejected contribution has not been received, so the obligation is unmet and the Superannuation Guarantee Charge can apply even though the employer initiated payment on time. Rejections are commonly caused by incorrect or incomplete member details or payment to a non-complying fund, and they need to be identified and reprocessed within the seven-business-day window rather than at the next pay cycle.