Why the Super guarantee increases to 12% from 1 July 2025

What is the super guarantee?

The super guarantee is the minimum amount employers must contribute to their employees’ superannuation funds. It’s calculated as a percentage of an employee’s ordinary time earnings. Previously set at 11.5%, the SG rate rose to 12% on 1 July 2025.

This increase is part of a long-standing plan by the Australian Government to ensure workers retire with more money. While the end goal is positive—better retirement outcomes for millions of Australians—the short-term reality for business owners is another layer of compliance and cost.

Why the super rate is increasing

The SG rate increase to 12% was legislated back in 2012. The government outlined a plan to lift the rate incrementally, pausing along the way to give businesses time to adjust. The latest step — going from 11.5% to 12% — is the final leg of that journey.

This change reflects broader concerns about the adequacy of retirement savings. Australians are living longer, and the government is keen to reduce future reliance on the Age Pension. More super contributions now means more retirement security later.

What a 12% SG rate means in practice

Here’s what the change looks like numerically. If you’re paying an employee $70,000 a year in ordinary time earnings:

• At 11.5%, the SG contribution is $8,050.
• At 12%, that rises to $8,400.
• That’s a $350 annual increase per employee.

If you have multiple employees, the cost adds up. Even if you offer total remuneration packages (where super is bundled into the total salary), you’ll still need to ensure the super component meets the new minimum.

It’s not just about sending more money to super funds. It’s about adjusting payroll systems, employment contracts, budgets, and accounting tools. And that’s where automation becomes essential.

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How this affects employers

As a business owner, you’re responsible for staying compliant with SG laws. Failing to pay the correct amount, or paying it late, can result in significant penalties, including the superannuation guarantee charge (SGC), which is non-deductible and includes interest and admin fees.

Here’s what needs to happen after 1 July 2025:

• Review employment contracts to ensure the wording reflects the new SG rate.
• Update payroll systems to automatically calculate 12% from the correct date.
• Adjust your budgets to factor in the increased employment cost.
• Communicate with your team if the change affects take-home pay under packaged agreements.

I’ve seen too many businesses get caught out by treating super like an afterthought. With the right software, there’s no need to risk late payments or incorrect amounts.

What this means for employees

For employees, the increase is good news. An extra 0.5% of their salary will go towards their super fund without having to lift a finger. Over a working lifetime, that adds up to tens of thousands of dollars in retirement savings.

If you're an employee receiving a total remuneration package (i.e. your salary includes super), this change may reduce your take-home pay unless your employer decides to absorb the increase. It’s worth clarifying your contract terms or having a conversation with HR if you need more information.

What about sole traders and contractors?

If you operate as a sole trader, you're not required to pay yourself SG contributions. But that doesn’t mean you should ignore this increase.

I always recommend sole traders make regular voluntary super contributions if their cash flow allows it. Not only does this prepare for retirement, but it also offers a tax deduction up to the concessional contributions cap, currently $27,500 per year.

If you pay yourself via a company structure, you’re technically an employee of that entity, and SG rules apply. In that case, you’ll need to comply just like any other employer.

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How to prepare for the change

Now is a great time to get everything sorted. Here are some actions worth taking:

• Audit your current payroll setup: Ensure your accounting or payroll software can accommodate SG rate changes automatically.
• Check employee agreements: Make sure your contracts don’t accidentally underpay SG contributions.
• Budget for the extra cost: Especially if you run a tight-margin business.
• Educate your team: Let staff know how the change affects them, especially if they’re on packaged salaries.
• Review super payments history: Identify any missed or late payments early to avoid penalties.

Final thoughts

The increase to a 12% super guarantee might sound minor, but for small businesses and sole traders, it has real implications. It impacts cash flow, payroll compliance, and the way contracts are structured.

Instead of treating this as a burden, I see it as an opportunity to tighten processes, improve automation, and invest in tools that simplify financial operations. If you haven’t already reviewed your accounting and payroll setup, now’s the time.

I’ve found that automating superannuation payments not only reduces errors and risk but also frees up time to focus on growing the business. With the SG rate locked in at 12% from 1 July 2025, that peace of mind is worth every cent.