The superannuation guarantee (SG) is Australia’s compulsory employer super contribution, and in 2026/27 it stands at 12% of earnings. If you hire staff or pay contractors in Australia, the rules apply to you, and the biggest trap is assuming contractors with an ABN are exempt. They often are not.
What is the superannuation guarantee?
The superannuation guarantee is Australia’s mandatory system of employer-funded retirement savings. Under the Superannuation Guarantee (Administration) Act 1992, employers must pay a minimum percentage of each eligible worker’s earnings into a complying super fund. It is paid on top of wages, never deducted from them, and it applies to full-time, part-time and casual employees alike.
The key thing to understand: SG is an employer obligation, not an employee contribution. There is no mandatory employee contribution in Australia, and employers cannot offset super against the wage they agreed to pay.
What is the superannuation guarantee rate in 2026/27?
The SG rate is 12% in 2026/27. The rate reached 12% on 1 July 2025 after a decade-long phased increase, and it is stable at 12% through 2026/27 with no further increases legislated, according to the ATO’s super guarantee rate table.
| Period | SG rate |
|---|---|
| 1 July 2024 to 30 June 2025 | 11.5% |
| 1 July 2025 to 30 June 2026 | 12% |
| 1 July 2026 to 30 June 2027 | 12% |
In practice, that means 12 cents of super for every dollar of eligible earnings. An employee on $85,000 of ordinary time earnings for the year attracts $10,200 in employer super contributions (12% x $85,000).
Tip: SG applies to the pay date, not the pay period. The ATO’s timing guidance says the 12% rate applies to salary and wages paid on or after the rate change date, even if part of the pay period falls before it. Payroll that straddles 30 June needs care.
Who must employers pay super for?
Super coverage in Australia is broader than many small business owners expect. Employers must pay SG for full-time, part-time and casual employees, including temporary residents of Australia. There is no upper age limit: employees over 70 are still entitled to employer super.
The eligibility rules, per the ATO:
- Workers aged 18 and over: super must be paid regardless of how many hours they work or how much they earn.
- Workers under 18: super must be paid only if they work more than 30 hours per week.
- No minimum earnings threshold: the old $450-a-month threshold was removed on 1 July 2022, so even very small earnings attract super.
Super is calculated on ordinary time earnings (OTE), which means earnings for ordinary hours of work, not total gross pay. OTE generally includes base salary and wages, commissions, allowances and some paid leave. It generally excludes overtime payments, expense reimbursements and unused leave paid out on termination. This distinction is the most common source of SG calculation errors, so classify variable pay carefully.
Does the superannuation guarantee apply to contractors?
Yes, it often does. For SG purposes, some independent contractors are treated as employees. If a contractor is an individual (a sole trader, not a company, trust or partnership), is paid wholly or principally for their labour, and does the work personally rather than delegating it, you will generally need to pay SG on top of their contract payments, even if they quote you with an ABN.
What counts as the earnings base changed with Payday Super:
- Earnings paid from 1 July 2026: super is 12% of the contractor’s qualifying earnings, which includes all payments for labour, whether in ordinary hours or overtime. Exclude payments for materials, equipment or other non-labour items, and exclude GST.
- Earnings paid up to 30 June 2026: super was 12% of the labour component of the payments, treated as OTE, excluding materials, overtime paid at overtime rates, and GST.
Watch out: the classic mistake is paying a contractor’s full invoice, then paying 12% on top of the whole amount including materials. A $20,000 invoice for a fit-out that is $12,000 of labour and $8,000 of materials attracts SG on $12,000, not $20,000. Ask contractors to itemise labour and materials separately, and keep records showing how you worked out the labour component.
How do you calculate super on a contractor invoice? (worked example)
Suppose you are a small business and you engage a freelance graphic designer, a sole trader, for a three-month project. She quotes $550 per day, works 40 billable days, and there are no materials, just her labour. Assumptions: the work is paid wholly for labour, done personally, and invoiced monthly.
Step 1: work out the labour total. 40 days x $550 = $22,000 of contract labour.
Step 2: apply the 12% SG rate. 12% x $22,000 = $2,640 in employer super contributions, paid on top of the $22,000.
Step 3: time it per payday. If she invoices $7,700 for month one, the super due on that month is 12% x $7,700 = $924, and it must reach her super fund within 7 business days of the payday from 1 July 2026.
The total project cost is therefore $22,000 + $2,640 = $24,640 before GST. That extra $2,640 is the cost of compliance, and it is why contractors whose clients must pay SG are more expensive to engage than the invoice alone suggests.
When must employers pay super under Payday Super?
From 1 July 2026, Payday Super requires employers to pay super contributions with each payroll cycle instead of quarterly. The contribution must reach the employee’s super fund within 7 business days of payday. This is a major shift from the old system, where contributions were due quarterly, and the ATO now has real-time visibility of whether contributions arrive on time.
The practical consequences:
- Payroll software must be configured to pay super on every pay run, not once a quarter.
- Clearing-house or fund processing delays now matter: the 7-day window counts receipt, not just your payment.
- Super is reported through Single Touch Payroll alongside wages.
- The ATO’s first-year compliance approach (PCG 2026/1) focuses on employers who genuinely try to pay each payday and fix errors quickly, with compliance priority on super still unpaid 28 days after the end of the quarter.
Tip: do a test pay run through your clearing house before your first July 2026 pay cycle and time how long it takes funds to land. If your provider takes five business days, your payroll cut-off must account for that.
What happens if you pay super late?
Late or underpaid super triggers the Super Guarantee Charge (SGC). The SGC is calculated on the shortfall and must be paid to the ATO, and unlike ordinary on-time super contributions, the SGC is not tax-deductible. That makes late super materially more expensive than paying on time.
There is also a ceiling on how much you ever need to pay. The maximum contribution base for 2026/27 is $270,830 of annual earnings. Once a worker’s qualifying earnings reach that amount for the year, no further SG is required on the excess. For an employee earning $300,000, SG is capped at 12% x $270,830 = $32,499.60.
How should freelancers factor super into their pricing?
If you hire contractors, you must budget the extra 12% on top of quoted rates. If you are the contractor, understanding SG protects you in two directions: you may be entitled to receive SG from your clients, and if you later hire subcontractors yourself, you inherit the obligation.
When comparing rates, always compare like with like. A $600/day contractor rate where the client pays SG on top is equivalent to roughly $535/day to a client who asks you to absorb it. Run the numbers on your day rate before agreeing terms: our freelance rate calculator helps you model a rate that covers your real costs, and the monthly rate calculator converts between day rates and monthly income so you can check that a client’s offer leaves room for super and GST.
Australian freelancers also need to handle the 10% GST on invoices for taxable supplies over the $75,000 registration threshold. LancerBill’s GST calculator works out the GST component of any invoice, and our step-by-step guide on how to calculate your freelance hourly rate shows how to fold employer-style costs like super into a billable rate. If you are still deciding how to structure your fees, our guide on retainer vs hourly vs project pricing compares the models contractors most often use.
Rule of thumb: when a client asks “what’s your all-in cost?”, the answer is your rate plus 12% super plus GST. Quote it that way so nobody is surprised later.
Key takeaways
- The superannuation guarantee rate is 12% in 2026/27, calculated on ordinary time earnings, and it is paid on top of wages, not deducted from them.
- From 1 July 2026, Payday Super means super must be paid each payday and reach the fund within 7 business days, replacing the old quarterly system.
- Contractors paid wholly or principally for their labour are often entitled to SG even when they invoice with an ABN, with GST and materials excluded from the calculation.
- Employees aged 18 and over get super regardless of hours or earnings; under-18s qualify only when working more than 30 hours a week.
- Late super attracts the Super Guarantee Charge, which is not tax-deductible, and the maximum contribution base for 2026/27 is $270,830 of annual earnings.
Frequently asked questions
Do I have to pay super for a contractor who invoices me with an ABN?
Sometimes. Having an ABN does not decide the question. If the contractor is an individual paid wholly or principally for their labour and does the work personally, SG usually applies. If they operate through a company, trust or partnership, or are genuinely paid for a result rather than their time, it generally does not.
Is super calculated on overtime?
For employees, no: super is calculated on ordinary time earnings, and overtime is generally excluded. For independent contractors from 1 July 2026, the earnings base is qualifying earnings, which includes all labour payments, including overtime labour.
Do I pay super on top of GST?
No. GST is excluded from the earnings base. SG is calculated on the labour component of the payment before GST is added.
What if a worker earns very little, like a few hours of casual work?
Super still applies. The old $450-a-month threshold was removed on 1 July 2022, so there is no minimum earnings amount for workers aged 18 and over.
Can salary sacrifice replace the super guarantee?
No. Salary sacrifice sits alongside SG, not instead of it. Your SG obligation is separate, and salary sacrifice amounts still count toward the worker’s concessional contributions cap.
How do I check whether a contractor counts for super?
The ATO provides a superannuation guarantee eligibility decision tool to help you decide whether a particular worker counts. If you are unsure, treat the obligation as real until you have confirmed otherwise, because the Super Guarantee Charge is not deductible and back-payment is expensive.
Rates last reviewed: October 2026.
This guide is for general information only and is not financial, tax or legal advice.