EXPLANATORY STATEMENT
STATUTORY RULES 1988 No 336
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE
SUBJECT: SUPERANNUATION ACT 1976 - SUPERANNUATION (INTEREST) REGULATIONS (AMENDMENT)
Section 168 of the Superannuation Act 1976 (the Act) provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing all 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, in certain circumstances, not been continuous, 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 for the Commissioner for Superannuation to pay to the Superannuation Fund out of the proceeds of any life assurance policies assigned to the Commissioner, and maintained on behalf of any contributor, the amount of the contributor’s share of the surrender value of the policies together with the amount of any interest that, in accordance with the regulations, is payable in respect of that amount.
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 1987-88, the rate for 1987-88 being 12.000% per annum. The Principal Regulations also prescribed the rate of interest which applied for the period of interest after the last financial year for which an annual rate had been set. This rate was 11.89% per annum and applied from 1 July 1988.
Prior to this Statutory Rule, to establish interest rates in respect of particular financial years, the Superannuation Fund Investment Trust (the Trust) advised the Commissioner for Superannuation of an amount of income available for allocation to contributors in respect of that year. The Commissioner then calculated 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, would apportion amongst contributors to the Fund in that year the amount of income to be allocated.
The income allocation arrangements were reviewed following the October 1987 sharemarket crash and it was determined that with effect from 1 July 1988 quarterly rates of interest were to be prescribed instead of annual rates of interest. The Statutory Rule amends the Principal Regulations to give effect to this change.
The amount of income to be allocated to contributors for the first quarter, i.e. the September 1988 quarter, is $61,985,532 and the Commissioner has calculated that the appropriate rate of interest to apportion this amount amongst contributors is 5.279% per annum. The Statutory Rule amends the Principal Regulations to provide that this rate of interest applies in respect of the period commencing 1 July 1988 and ending 30 September 1988.
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 October 1988. The Statutory Rule therefore, prescribes the rate of 12.42% per annum, which was the assessed secondary market weighted average yield for 10-year non-rebatable Treasury bonds as published by the Reserve Bank on 1 December 1988, to apply in respect of the period commencing on 1 October 1988 in lieu of the previous rate of 11.89% per annum which was prescribed on 16 September 1988.
The regulations contained in the Statutory Rule operate from the date of gazettal. The provisions of the regulations contained in the Statutory Rule are outlined in the attachment.
ATTACHMENT
SUMMARY OF PROVISIONS OF SUPERANNUATION (INTEREST) REGULATIONS (AMENDMENT)
The Superannuation (Interest) Regulations (Amendment) operate from the date of gazettal.
2. Regulation 1 provides that, in the Regulations, the term “Principal Regulations” means the Superannuation (Interest) Regulations.
3. Regulation 2 provides for Regulation 6 of the Principal Regulations to be amended as follows:
(a) Paragraph 2(a) amends sub-regulation (1) to provide a new rate of interest of 12.42% per annum to apply for the period commencing 1 October 1988 to replace the rate of 11.89% per annum which applied for the period commencing 1 July 1988.
(b) Paragraph 2(b) inserts new sub-regulations (2), (3) and (4) to provide for the change in the income allocation arrangements to prescribe quarterly rates of interest, with effect from 1 July 1988, instead of annual rates. The new sub-regulation (2) provides that interest payable in respect of a prescribed amount shall accrue:
• at the rates of interest specified in Part I of the Schedule for the financial years 1976-77 to 1987-88 in respect of periods of interest (or parts of a period of interest) to 30 June 1988;
• at quarterly rates of interest specified in Part II of the Schedule for periods of interest (or parts of a period of interest) from 1 July 1988; and
• at a rate of interest of 12.42% per annum for the period (or part of a period) commencing on 1 October 1988.
The new sub-regulation (3) provides for interest to be compounded on the following basis:
• where the period of interest commenced on or after 1 July 1988 - on the last day of each quarter in each year; and
• where the period of interest commenced before 1 July 1988 - on 30 June in each year in respect of that part of the period that ended on 30 June 1988 and on the last day of each quarter in each year in respect of that part of the period that commenced on 1 July 1988.
The new sub-regulation (4) provides that the various rates of interest specified under Parts I and II of the Schedule in respect of particular periods are applicable for calculating the interest accrued under sub-regulation (2).
(c) Paragraph 2(c) omits from sub-regulation (5) the second reference to the expression “of interest” which is redundant.
(d) Paragraph 2(d) inserts a new sub-regulation (6) to define a quarter, for the purposes of the Regulations, as a period of three months commencing 1 January, 1 April, 1 July and 1 October in any year.
4. Regulation 3 amends the Schedule in the Principal Regulations to provide for the rates of interest applicable to financial years to be specified in Part I and for the rates of interest applicable to quarters to be specified in Part II.
5. Regulation 4 provides that the interest rates and other amendments prescribed by Regulations 2 and 3 apply to contributors under the Act who cease Commonwealth employment on or after the date of gazettal of the Regulations and to persons to whom deferred benefits under the Act become payable after the date of gazettal of the Regulations.