The superannuation guarantee 12 percent explained, with the new annual cap and Payday Super

The superannuation guarantee (SG) is the minimum retirement contribution an Australian employer must pay for its employees, set at 12% of qualifying earnings for 2026-27 and at 12% from 1 July 2027 onwards, according to the ATO’s super guarantee page. The one exception in the ATO table is Norfolk Island, at 11% in 2026-27.

The employer pays SG from its own money. It is not deducted from the employee’s salary, and an offer of AUD 110,000 plus super means AUD 110,000 of salary with AUD 13,200 of contributions paid on top. The fund, not the payroll, deducts 15% tax from the contributions.

For companies used to retirement systems where contributions are split between employer and employee, the Australian model is simpler to read: one rate, paid by the employer, into a fund chosen by the employee. The complexity lies in what counts as earnings, the annual cap and the payment timetable, which the next sections cover.

Because the ATO already lists 12% for 1 July 2027 onwards, budgets for 2027-28 can use the same rate. The amounts will still move, since salaries and the annual cap on earnings change from year to year.

Qualifying earnings (QE), a term that arrived with Payday Super, has been the SG base since 1 July 2026. It takes in ordinary time earnings, every commission, super that the employee salary-sacrifices, and any other payment that counted as salary or wages for SG before the change.

Ordinary time earnings are broadly what an employee earns for ordinary hours of work. The practical effect of the QE definition is that commissions are now always inside the base, and salary sacrificed into super still counts as earnings when the 12% is worked out, so an employee cannot reduce the employer’s SG by sacrificing.

Earnings paid up to 30 June 2026 remain under the old rules, including the old quarterly timetable. Any back pay or late adjustment for a period before that date should be checked against the ATO’s transitional guidance on the Payday Super overview page before it is processed.

For a role with a base salary, a sales commission and no overtime, the QE figure for each pay run is the salary instalment plus any commission paid in that run. Overtime and certain allowances need to be checked against the ATO’s list, and a payroll provider that already handles award-covered staff will have the mapping in place. Getting the mapping right at set-up matters more now, because an error repeats on every payday instead of once a quarter.

The maximum contribution base caps the earnings on which SG must be paid, and for 2026-27 it is AUD 270,830 a year. Once the QE paid to an employee in the financial year reaches that figure, SG stops for the rest of the year, as the ATO maximum contribution base page explains. In 2025-26 the base was quarterly, at AUD 62,500 a quarter.

A worked example shows how the annual base behaves. Assume a Sydney employee earning AUD 300,000 a year, paid AUD 25,000 on each of 12 monthly paydays, with no commission and no salary sacrifice. After ten months, QE for the year is AUD 250,000 and SG paid is AUD 30,000. In month eleven only AUD 20,830 of earnings remains below the base, so SG for that month is AUD 2,499.60. In month twelve SG is nil. The year’s total is AUD 32,499.60, which is 12% of AUD 270,830.

That total sits just under the 2026-27 concessional contributions cap of AUD 32,500. Salary-sacrificed super also counts towards the cap, so for an employee at or near the base there is almost no room for extra concessional contributions, and they should take their own advice before agreeing to salary sacrifice. The base is indexed each year, so the figure will change for 2027-28.

• The base is annual from 2026-27, measured on QE paid in the financial year.
• SG stops for the year once the base is reached, and restarts on 1 July.
• An employer may choose to keep contributing above the base; the contract should say whether it will.

Since 1 July 2026, SG must be paid with each pay run and has to be in the fund no more than 7 business days after wages are paid. Before that date, employers could pay super quarterly, and the move to a payday cycle multiplies the number of payment deadlines an employer has to meet.

Take a monthly payday on Wednesday 14 October 2026. Counting business days, which exclude weekends and national public holidays, the contribution for that pay run must be in the employee’s fund by Friday 23 October 2026. A fortnightly payroll produces 26 such deadlines a year per employee.

The cash-flow effect is real for employers who used to hold super until the quarterly due date. Under the old timetable, contributions for July, August and September could be paid together in late October; now each month’s super leaves the business within days of the salary it relates to. Budgets and treasury forecasts built on the old pattern need updating.

The ATO’s deadline rules allow some extra time. There are 20 business days for a starter’s first contribution and for the first payment into a fund the employer has not used before. Wages paid outside the normal cycle are tied to the following regular payday’s deadline, up to 20 business days may be allowed when circumstances are exceptional, and where two deadlines overlap the later one governs.

Payday Super also changed the plumbing. The ATO’s Small Business Superannuation Clearing House, which stopped taking new users in October 2025, shut entirely on 1 July 2026, and Single Touch Payroll reports must now include each employee’s QE and super liability. The Payday Super guide goes through the operational changes step by step.

A missed or late contribution under Payday Super triggers the new super guarantee charge, which the ATO describes on its SG charge page. It is built from four parts:

• The individual final shortfall, meaning the unpaid super itself.
• Notional earnings, calculated using the general interest charge (GIC) rate with daily compounding.
• An administrative uplift capped at 60%, cut by as much as 40 percentage points where the employer discloses voluntarily or has a clean record.
• Where the employee’s fund choice was ignored, a choice loading equal to 25% of contributions, with a ceiling of AUD 1,200 for each notice period.

The employer can deduct the charge components for tax. It cannot deduct GIC levied for paying the charge itself late, or late-payment penalties. For 2026-27, the first year under the new system, the ATO has promised a supportive approach; that is not an exemption, so contributions still need to reach the fund on time.

The practical risks to plan for are process gaps, such as a new starter whose fund details arrive after the first pay run, a contribution rejected by the fund because of a mismatched member number, and a bonus paid outside the normal cycle. A monthly reconciliation of contributions sent against contributions received by each fund catches all three.

The choice loading is a reminder that the employee picks the fund. Payroll needs the employee’s fund details at onboarding, and a new starter’s first contribution has the longer 20-business-day window to allow for that set-up.

Super adds 12% to the salary bill directly, and more once state taxes are counted, because payroll tax in New South Wales applies to wages including super. The Sydney cost example sets out each line.

That example assumes a Sydney-based full-time hire paid AUD 110,000, super at 12% on top, payroll tax charged at the NSW rate of 5.45% on every dollar (assuming the employing group is already over the AUD 1,200,000 threshold) and an illustrative 0.30% workers’ compensation rate. Super is AUD 13,200, payroll tax on salary plus super is AUD 6,714.40, workers’ compensation is AUD 369.60 and total employer cost is AUD 130,284 for 2026-27.

Of the AUD 20,284 above salary in that example, super is about 65%. It is also the only on-cost the employee sees, on each payslip and in their fund account, which is why candidates compare offers on a “plus super” basis.

Our service charge is separate from those statutory costs: from USD 560 for each employee every month, worth roughly AUD 797 once the ECB’s figure for 24 September 2026 is applied. The pricing page lists what that charge covers.

If Employer of Record Australia handles the hire, SG on each pay run is worked out by us as the employee’s legal employer, and we then pay it to the employee’s chosen fund and report QE and super liability through Single Touch Payroll. You fund the salary, the super and the other on-costs through the monthly invoice.

What you decide is the package: the base salary, whether commission applies and whether you want to contribute above the 12% minimum or above the maximum contribution base for senior staff. Those choices go into the employment contract so that payroll can apply them from the first pay run.

The employee also has decisions to make at onboarding: which fund receives the contributions and whether to salary sacrifice. If the employee names no fund, ATO rules decide where the money goes, so ask your provider how it handles that step before the start date. The first contribution has the 20-business-day window, which gives time for the fund details to arrive.

Parental leave has its own super rule. For children born or adopted from 1 July 2025, the ATO pays 12% super on government Parental Leave Pay directly into the fund after the end of the financial year, so the employer does not fund that part. The payroll guide covers how PAYG withholding and STP run alongside super in the same cycle.

Q01What is the superannuation guarantee rate in 2026-27?+

A.12% of qualifying earnings, paid by the employer on top of salary. The ATO lists 12% for 2026-27 and for 1 July 2027 onwards; Norfolk Island is at 11% in 2026-27.

Q02Is super deducted from an Australian employee’s salary?+

A.No. The employer pays the 12% from its own funds into the employee’s super fund. An AUD 110,000 salary carries AUD 13,200 of super on top.

Q03What is the maximum contribution base for 2026-27?+

A.AUD 270,830 per year. Once qualifying earnings paid in the financial year reach that figure, SG stops until the next 1 July. In 2025-26 the base was quarterly, at AUD 62,500.

Q04When must super be paid under Payday Super?+

A.From 1 July 2026 the fund must receive each contribution by the seventh business day after the payday it belongs to. A new starter’s first contribution, and a first payment to a fund new to the employer, get a longer window of 20 business days.

Q05What is the penalty for paying super late?+

A.The new super guarantee charge. It adds together the unpaid amount, daily-compounded notional earnings, an uplift of as much as 60% and, if the employee’s fund choice was not followed, a choice loading of no more than AUD 1,200 per notice period.