EXPLANATORY STATEMENT
Issued by the authority of the
Minister for Employment and Workplace Relations
Safety, Rehabilitation and Compensation Act 1988 and Safety, Rehabilitation and Compensation and Other Legislation Amendment Act 2007
Definition of the weekly interest on the lump sum - Subsection 21(5)
The Safety, Rehabilitation and Compensation Act 1988 (the SRC Act) establishes the Commonwealth workers’ compensation and rehabilitation scheme.
Sections 21 and 21A of the SRC Act contain provisions dealing with the calculation of weekly compensation payments where a claimant is in receipt of a lump sum superannuation benefit. Weekly incapacity benefits are reduced by the deemed interest earned on the lump sum superannuation benefit. These sections have been amended by the Safety, Rehabilitation and Compensation and Other Legislation Amendment Act 2007 (SRCOLA Act). The amendments took effect on 27 April 2007.
Prior to these amendments, claimants were deemed to earn interest on their lump sums at a fixed rate of 10%. Under the new formulas the Minister for Employment and Workplace Relations is required, under new subsection 21(5), to determine an annual rate with effect from 1 July each year. This will allow the deemed interest rate to be set, and adjusted annually, to reflect market interest rates.
Section 47 of the SRCOLA Act allows the Minister to make a transitional determination for part of the first year.
The Notice specifies the deemed interest rate at 5.72%. This is the ten-year Government bond rate averaged over the period 1 April 2006 to 31 March 2007.
The Government bond rate was selected because it represents a reasonable investment return for persons who receive their superannuation as a lump sum and then re-invest the amount. The rate is calculated based on the average of the ten-year Government bond rate over the 12 months up to 31 March of the relevant year.
The Notice applies from proclamation of the relevant section on 27 April 2007 to 30 June 2007.
The Department consulted with Comcare on the appropriate interest rate to be set.
An assessment was made under the new guidelines issued by the Office of Best Practice Regulation, which indicated that a Regulation Impact Statement was not required for this Notice.
This Notice is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
This notice takes effect from 27 April 2007, the date item 24 of Schedule 1 to the Safety, Rehabilitation and Compensation and Other Legislation Act 2007 commences