EXPLANATORY STATEMENT
STATUTORY RULES 1988 NO 113
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 the 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 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, e.g., upon 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 1986-87, the rate for 1986-87 being 22.676% per annum. The Principal Regulations also prescribed the rate of interest to apply from 1 July 1987, which was 6%.
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 to net contributions to the Fund during the year, will apportion amongst contributors to the Fund in that year the total amount of income available for allocation. As noted above the income allocation for the year 1986-87 resulted in an annual interest rate of 22.676%.
So that the benefits of contributors leaving the Fund can be determined before the annual rate for 1987-88 is prescribed, it is also necessary in the interim period to calculate and to prescribe a rate of interest to apply from 1 July 1987. In the light of the actual performance of the Fund to the end of April 1988 as advised by the Trust, an interest rate of 8% per annum has been prescribed to apply in lieu of the former rate of 6%.
The Regulations contained in the Statutory Rule amend the Principal Regulations by prescribing an interest rate of 8% for the period commencing on 1 July 1987.
The new interest 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) Statutory Rules 1988 No 113, issued by authority of the Minister for Finance, amends the Superannuation (Interest) Regulations 1987 under the Superannuation Act 1976. This legislation was enacted to address the need for adjusting the interest rates applicable to accumulated basic and supplementary contributions within the superannuation system for the financial year 1987-1988. The Superannuation Act 1976 was established to provide a framework for the regulation and management of superannuation funds in Australia, ensuring that contributions and benefits are managed in a fair and efficient manner. The policy objective behind these amendments is to reflect the actual performance of the Superannuation Fund and ensure that the interest rates are aligned with the fund's income allocation, thereby maintaining the integrity and sustainability of the superannuation system.
The regulations were necessitated by the need to prescribe an interim interest rate for the financial year 1987-1988, reflecting the actual performance of the Superannuation Fund Investment Trust as reported by the Auditor-General. The Superannuation Fund Investment Trust advises the Commissioner for Superannuation on the amount of income available for allocation to contributors, which is then used to calculate the applicable interest rates. The new interest rate of 8% per annum was determined based on the fund's performance up to April 1988, replacing the previously prescribed rate of 6% for the period commencing 1 July 1987. These amendments ensure that the benefits of contributors leaving the Fund are determined accurately before the annual rate for 1987-1988 is prescribed.
Scope and Application
The Superannuation (Interest) Regulations (Amendment) Statutory Rule 1988, issued under the authority of the Minister for Finance, amends the Superannuation (Interest) Regulations to adjust the interest rate applicable to accumulated basic contributions and accumulated supplementary contributions for contributors who cease Commonwealth employment or for whom deferred benefits become payable after the date of gazettal of the Regulations. This amendment is made under the legislative authority provided by Section 168 of the Superannuation Act 1976, which allows the Governor-General to make regulations necessary for carrying out or giving effect to the Act. The amendment specifies an interest rate of 8% per annum for the period commencing on 1 July 1987, replacing the previous rate of 6%. The new interest rate applies to all contributors under the Act, ensuring their benefits are calculated accurately based on the most recent financial performance of the Superannuation Fund.
Key Provisions
The main operative sections of the Superannuation (Interest) Regulations (Amendment) pertain to the establishment of interest rates for accumulated basic and supplementary contributions under the Superannuation Act 1976. Specifically, section 1 of the Statutory Rule amends the Principal Regulations to set a new interest rate of 8% for the period starting from 1 July 1987 (section 1(1)). This amendment applies to contributors who cease Commonwealth employment on or after the date of the gazette and to those who become entitled to deferred benefits post the same date (section 1(2)). Additionally, the new rate is to be applied to the relevant contributions and any interest accruing on them (section 1(3)).
The obligations imposed by these regulations on the parties governed by the Act primarily revolve around the accurate calculation and application of the interest rates as prescribed. For contributors, this means that their accumulated contributions will now accrue interest at the new rate of 8% from 1 July 1987 onwards (section 1(1)). For the Commissioner for Superannuation, it entails calculating and applying this new rate to the contributors' balances and net contributions for the financial year 1987-88 and beyond. The regulations also impose a responsibility on the Commissioner to ensure that the benefits of contributors are determined accurately before the new annual rate is set (section 1(2)). Furthermore, the regulations bind the Commissioner to handle the payment of contributors' shares of the surrender value of life assurance policies in accordance with the prescribed interest rate (section 1(3)).
Under these regulations, any failure to comply with the prescribed interest rate or its application can lead to civil consequences. While the regulations do not explicitly outline specific offences, non-compliance with the Act's provisions for interest calculation and application could potentially result in legal actions for breach of regulatory duty. Additionally, contributors adversely affected by incorrect interest calculations might seek remedies under civil law for any losses incurred. The penalties for such breaches are not explicitly stated within the regulations themselves but would typically be determined within the broader framework of the Superannuation Act 1976, which could include fines or other civil penalties as deemed appropriate by the court.