Superannuation Guarantee (Administration) Regulations (Amendment) 1996 No. 148
EXPLANATORY STATEMENT
STATUTORY RULES 1996 No. 148
Issued by authority of the Assistant Treasurer
Superannuation Guarantee (Administration) Act 1992
Superannuation Guarantee (Administration) Regulations (Amendment)
These regulations insert Regulations 7A and SA into the Superannuation Guarantee (Administration) Regulations. Regulation 7A sets the rate for the nominal interest component, which is prescribed under subsection 31(1) of the Act, at 10% per annum. Regulation 8A sets the penalty rate for late payment of Superannuation Guarantee Charge (the charge), which is prescribed under subsection 49(2) of the Act, at 10% per annum.
Section 80 of the Superannuation Guarantee (Administration) Act 1992 (the Act) provides that the Governor-General may make regulations prescribing matters required to give effect to the Act.
Under the Act, an employer who does not make the minimum level of superannuation contributions into a complying fund on behalf of employees is required to pay the Superannuation Guarantee charge (the charge).
The charge is imposed on the employer's superannuation guarantee shortfall and comprises three components including a nominal interest component.
In cases where the charge remains unpaid after the time when it became payable, an additional amount is payable as a penalty under section 49 of the Act.
Unlike a late payment penalty which seeks to compensate the revenue for the late payment, the non-final interest component (as used also in the penalty component) seeks to compensate an employee for loss of earnings (interest) that would have been derived from a Superannuation fund had the employer made superannuation contributions into such a fund.
Subsections 31(1) and 49(2) of the Act make reference to interest being calculated at the rate applicable under the relevant regulations. Regulations specifying these rates have not been prescribed for these subsections. In the absence of such regulations, transitional provisions have applied to set the rate of interest for both subsections at 10% per annum. This provision has, however, a limited life. Subsection 47(1) of the provision limits the calculation of the nominal interest component applicable under subsection 31(1) and any additional superannuation charge under subsection 49(2) to any you prior to the commencement of Schedule 5, namely the 1994195 year and prior years.
A problem therefore arises after the 1995196 year when the shortfall component of the charge relating to the 1995-96 year is crystallised 28 days after the end of the contribution period (ie. on the 28th July 1996). The transitional provision will no longer apply and therefore the nominal interest component will be zero. Likewise these same transitional provisions will no longer apply to the operation of subsection 49(2) with the result that any additional penalty charge payable under this subsection will be zero.
The Government considers it appropriate that the rate of interest applicable for the nominal interest component (under section 31) and the penalty for any unpaid charge (under section 49) should remain at 10% per annum. Accordingly, the regulations prescribe that rate.
Details of the amending regulations are as follows:
Regulation 1 amends the Superannuation Guarantee (Administration) Regulations as set out in the amending Regulations. The note to regulation 1 provides that the amending regulations will commence on gazettal.
Regulation 2 inserts new Regulation 7A.
New regulation 7A provides that the nominal interest component of the Superannuation Guarantee Charge, as stipulated in subsection 31(1) of the Act, will be 10% per annum.
Regulation 3 inserts new Regulation 8A.
New regulation 8A provides that for any additional superannuation guarantee charge by way of penalty under subsection 49(2) of the Act, attracts a penalty at the rate of 10% per annum.
Overview
The Superannuation Guarantee (Administration) Regulations (Amendment) 1996 No. 148, issued under the authority of the Assistant Treasurer, amends the Superannuation Guarantee (Administration) Regulations 1992 to address a gap in the existing legislative framework. This amendment was enacted to ensure that the rates for the nominal interest component and penalty rates for late payments of the Superannuation Guarantee Charge remain consistent and predictable for employers and employees. This was necessary as the existing transitional provisions, which set the rate of interest at 10% per annum, were set to expire at the end of the 1995-96 financial year. The policy objective of these regulations is to maintain the integrity of the superannuation system by ensuring that the interest rates for unpaid superannuation charges remain at a fixed rate of 10% per annum, thus avoiding any discontinuity in the calculation of these charges post the expiration of the transitional provisions.
Scope and Application
The Superannuation Guarantee (Administration) Regulations (Amendment) 1996 No. 148 pertains to employers who are required to make the minimum level of superannuation contributions on behalf of their employees under the Superannuation Guarantee (Administration) Act 1992. The regulations specifically address the calculation of the nominal interest component and the penalty rate for late payment of the Superannuation Guarantee Charge. The Act applies to employers across all industries in Australia, with a Commonwealth jurisdictional reach. The amendments set forth in these regulations establish the nominal interest component at 10% per annum and the penalty rate for late payment at the same 10% per annum, ensuring consistency and predictability in the application of these financial obligations. The regulations are intended to remain in effect until such time as the Governor-General may make further regulations, thereby extending or potentially restricting the application through subordinate instruments as necessary.
Key Provisions
The Superannuation Guarantee (Administration) Regulations (Amendment) 1996 No. 148 introduces two new regulations, 7A and 8A, into the Superannuation Guarantee (Administration) Regulations. Regulation 7A establishes that the nominal interest component of the Superannuation Guarantee Charge (SGC), as stipulated in subsection 31(1) of the Act, will be 10% per annum. Regulation 8A sets the penalty rate for late payment of the SGC at 10% per annum, as outlined in subsection 49(2) of the Act. These regulations were made under the authority of the Assistant Treasurer and aim to ensure the proper administration of the Superannuation Guarantee (Administration) Act 1992.
These amendments impose specific obligations on employers who are required to make minimum superannuation contributions into a complying fund on behalf of their employees. Failure to make these contributions results in the employer being liable to pay the Superannuation Guarantee Charge. This charge comprises three components: the nominal interest component, the non-final interest component, and any additional penalty for late payment. Employers must ensure that they adhere to these requirements to avoid incurring the SGC and subsequent penalties.
Under the amended regulations, the nominal interest component and the penalty rate for late payment are set at 10% per annum. This rate applies to the shortfall component of the charge for the 1995-96 year and any prior years, as stipulated by subsection 47(1). For the 1995-96 year, the nominal interest component will be zero after 28 days from the end of the contribution period, which is 28th July 1996, as the transitional provisions will no longer apply. Similarly, the penalty charge under subsection 49(2) will also be zero from this date.
Failure to comply with the requirements of the Superannuation Guarantee (Administration) Act 1992 and the amended regulations may result in various consequences. Employers who do not make the required superannuation contributions are liable to pay the Superannuation Guarantee Charge. The nominal interest component and the penalty rate of 10% per annum apply to this charge. If employers fail to make timely payments, they will incur additional penalties. Non-compliance may also result in legal action being taken against the employer, including potential civil or criminal penalties as prescribed by the Act.