EXPLANATORY STATEMENT
STATUTORY RULES 1987 NO 271
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.
Subsection 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 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 contributions.
Section 7A ensures that, where a contributor’s period of contributory service has not been continuous because the person was at some stage an invalidity pensioner receiving both standard and additional invalidity pension 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 a person prior to the break in service together with interest calculated in accordance with the Regulations.
Section 145 of the Act provides that, where a contributor was previously a member of a superannuation scheme based or. 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, e.g., on the policies maturing while the person is still a contributor or upon the contributor attaining the minimum retiring age applicable to such a person, the policies cease to be available to the contributor. In these circumstances the Commissioner is required in accordance with
subsections 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
Prior to the making of the Statutory Rule, the Superannuation (Interest) Regulations (the Principal Regulations) prescribed the rates 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 1976-77 to 1985-86, the rate for 1985-86 being 16.714% per annum. The Principal Regulations also prescribed the rate of interest to apply from 1 Jul 1986 which was 22.973%.
To establish interest rates in respect of particular financial years the Superannuation Fund Investment Trust (the Trust), after the financial statements for the Trust for a particular year have been reported upon by the Auditor-General, advises the Commissioner for Superannuation of the amount of income available for allocation to contributors in respect of that year. The Commissioner then calculates the rate of interest that, when applied to the opening balances of contributors’ accumulations according to his records and net contributions to the Superannuation Fund during the year, will apportion amongst contributors to the Fund in that year the total amount of income available for allocation.
The amount available for allocation to contributors for the 1986-87 financial year, as advised to the Commissioner by the Trust, is $791,849,542 and the Commissioner has calculated that the appropriate rate of interest to apportion this amount amongst contributors is 22.676% per annum. The regulations contained in the Statutory Rule amend the Principal Regulations by prescribing an interest rate of 22.676% per annum for the financial year 1986-87.
So that the benefits of contributors leaving the Fund can be determined it is also necessary to prescribe a rate of interest to apply from 1 Jul 1987. Following losses in October as a result of the share market crash, the Trust has advised that its estimates indicate that the rate for the four months to October would be zero or less.
As a more precise figure will not be available for some time and as the legislation does not permit a negative rate of interest the regulations contained in the Statutory Rule also amend the Principal Regulations by prescribing an interest rate of zero per cent per annum to apply from 1 Jul 1987.
The new interest rates apply to contributors under the Act who cease Commonwealth employment on or after the date of gazettal of the regulations. The new rates also apply to those persons to whom deferred benefits become payable after the date of gazettal of the regulations.