EXPLANATORY STATEMENT
STATUTORY RULES 1984 NO. 240
ISSUED BY AUTHORITY OF THE MINISTER FOR FINANCE
SUPERANNUATION ACT 1976
SUPERANNUATION (INTEREST) REGULATIONS (AMENDMENT)
LEGISLATIVE BASIS FOR THE REGULATIONS
Section 168 of the Superannuation Act 1976 (the Act) provides that the Governor-General may make Regulations, not inconsistent with the Act, prescribing matters which the Act requires or permits to be prescribed or which are necessary or convenient to be prescribed for carrying out or giving effect to the Act.
Sub-section 3(1) of the Act defines “accumulated basic contributions” and “accumulated supplementary contributions” in relation to a person who has ceased to be a contributor as:
(a) an amount equal to the sum of the relevant contributions paid by the person and the amount of any interest that, in accordance with the Regulations, is payable in respect of those contributions; and
(b) in the case of a person who has previously ceased to be a contributor, any amount that, under section 7A of the Act is to be added to the amount of the person’s accumulated relevant contributions.
Section 7A ensures that, where a contributor’s period of contributory service has not been continuous owing to the person having been at some stage an invalidity pensioner or a person to whom deferred benefits were applicable, the person’s accumulated contributions on again ceasing to be a contributor will include the contributions made by such person prior to the break in service, in accordance with the Regulations.
Section 145 of the Act provides that, where a contributor was previously a member of a superannuation scheme based on life assurance policies, such policies may be assigned to the Commissioner for Superannuation who will arrange for them to be maintained on behalf of the contributor. In certain circumstances, eg on the policies maturing while the person is still a contributor or on the contributor attaining the minimum retiring age applicable to such person, the policies cease to be available to the contributor. In these circumstances, the Commissioner is required, in accordance with sub-sections 145(8) and 145(9), to pay to the Fund, out of the proceeds of the policies, the amount of the contributor’s share of the surrender value of the policies as at the date of cessation of membership from the previous scheme together with the amount of any interest that, in accordance with the Regulations, is payable in respect of that amount.
BACKGROUND
The Superannuation (Interest) Regulations prescribe the rate of interest payable on accumulated basic contributions and accumulated supplementary contributions, and interest payable into the Superannuation Fund out of the proceeds on maturity or surrender of life assurance policies for the financial years commencing 1 July 1976 to 1 July 1982, The Regulations also prescribe the rate of interest to apply from 1 July 1983 in respect of a person who has ceased to be an eligible employee on or after 1 July 1983. This rate is currently 11.5%.
Under the Regulations, a person who ceases to be an eligible employee is entitled to interest on his basic and supplementary contributions for the period commencing on his first day of interest (in general, the day contributions were first deducted) and ending on the person’s termination day.
Because audited financial statements are not yet available it is not yet possible to determine an interest rate for the year ended 30 June 1984 although the earning rate for that year is estimated to be of the order of 13%. An interest rate of 12.700% is now prescribed to apply to the period from 1 July 1983. This rate reflects the estimated earning rate of the Superannuation Fund in 1983-84 and the estimated earning rate for 1984-85 in the period to October 1984.
CONTENT OF THE PROPOSED AMENDMENT OF THE REGULATIONS
The Regulations contained in the Statutory Rule amend the Superannuation (Interest) Regulations by prescribing an interest rate of 12.700% for the period commencing 1 Jul 1983.
This new rate applies to contributors under the Act who cease Commonwealth employment on or after the date of gazettal of the Regulations. The new rate also applies to those persons to whom deferred benefits become payable after the date of gazettal of the Regulations.
Overview
The Superannuation (Interest) Regulations (Amendment) 1984, issued under the authority of the Minister for Finance, amends the existing Superannuation (Interest) Regulations established by the Superannuation Act 1976. The primary purpose of the 1976 Act was to address gaps in the superannuation system, ensuring that Australians have adequate retirement savings. The Regulations, as amended, govern the interest rates payable on accumulated basic and supplementary contributions, as well as on contributions from the proceeds of life assurance policies. The 1984 Amendment adjusts the interest rate from 1 July 1983, reflecting the estimated earnings of the Superannuation Fund during the relevant financial years. This legislative amendment is aimed at ensuring that the interest rates remain aligned with the economic conditions and the fund's performance, thereby maintaining the value of superannuation savings for contributors.
Scope and Application
The Superannuation (Interest) Regulations, as amended by Statutory Rule 1984 No. 240, pertain to individuals who have ceased to be contributors to a superannuation scheme under the Superannuation Act 1976. The Regulations apply to both accumulated basic and supplementary contributions, ensuring that interest is payable in accordance with the prescribed rates. These provisions also cover the assignment of life assurance policies to the Commissioner for Superannuation, who is responsible for managing these policies on behalf of contributors, particularly in cases where the contributor’s service was not continuous or where the policies mature or are surrendered. The Regulations set out the interest rates for financial years beginning from 1 July 1976 and specify the rate applicable to those who have ceased to be eligible employees from 1 July 1983 onwards. The recently amended rate of 12.700% applies from 1 July 1983, reflecting the estimated earning rates of the Superannuation Fund. This rate adjustment ensures that the interest payable to contributors aligns with the fund's performance, thereby maintaining the integrity of the superannuation benefits system.
Key Provisions
The Superannuation (Interest) Regulations, as amended by the Statutory Rule, detail the interest rates to be applied to accumulated basic contributions and accumulated supplementary contributions for certain periods. According to section 3(1) of the Superannuation Act 1976, these regulations determine the interest rates for contributions made by individuals who cease to be contributors, ensuring that their contributions accrue interest up until their termination date. The amended regulations prescribe an interest rate of 12.700% for the period commencing 1 July 1983. This rate applies to contributors who cease Commonwealth employment on or after the date of the gazettal of the Regulations, as well as to those persons for whom deferred benefits become payable following the same date. This amendment ensures consistency and clarity in the application of interest rates to superannuation contributions.
The regulations impose specific obligations on the parties involved, primarily the contributors and the Commonwealth. Contributors must ensure that their superannuation contributions are accurately calculated with the prescribed interest rate once they cease to be eligible employees. For the Commonwealth, the regulations mandate the application of the specified interest rates to contributions made by employees who terminate their employment or become eligible for deferred benefits post the date of the amendment. This includes ensuring that the correct interest rate is applied to the contributions and any associated interest, as per the regulations.
Failure to comply with the Superannuation (Interest) Regulations may lead to civil or criminal consequences. While the specific penalties are not detailed in the provided text, the Act generally imposes penalties for non-compliance, which can include fines and, in severe cases, imprisonment. The exact penalties would depend on the nature and severity of the breach, but the overarching aim is to ensure that the regulations are adhered to strictly to maintain the integrity and fairness of the superannuation system. It is imperative that all parties involved are fully aware of their obligations under these regulations to avoid any legal repercussions.