The Superannuation Guarantee rate - to be paused for three years at 9.5%

The Budget proposes to increase the SG rate from 9.25% to 9.5% for 2014/15 and the 9.5% rate will apply for the following three years. With effect from 1 July 2018 the SG rate will increase to 10% and a further 0.5% until the rate reaches 12% in respect of the 2022-23 financial year.

The now proposed, as against the previously proposed, rates are set out in the following table:

Financial year

Budget 2014

Previously (as legislated)

2014/15

9.5%

2015/16

9.5%

10%

2016/17

9.5%

10.5%

2017/18

9.5%

11%

2018/19

10%

11.5%

2019/20

10.5%

12%

2020/21

11%

12%

2021/22

11.5%

12%

2022/23

12%

SUPERCentral Comment

At a very high level view this pausing of the SG rate at 9.5% will not have an economy wide impact. The far more significant and pernicious issue is the widely held belief that superannuation at the SG contribution rate (whether at the rate of 9.5% or 12%) will produce a sufficient level of accumulated capital to produce a reasonable level of retirement income. Even at 12% SG contribution rate, the real rate of contribution is 10.2% (after tax).