EXPLANATORY STATEMENT
STATUTORY RULES 1987 NO 99
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 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.
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 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 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 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., 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 sub-sections 145(8) and 145(9) of the Act, 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.
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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 and 1985-86, the last being 16.714% for 1985-86. The Principal Regulations also prescribed the rate of interest to apply from 1 Jul 1986, which was 17.875%.
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 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 1985-86 resulted in an annual interest rate of 16.714%.
So that the benefits of contributors leaving the Fund can be determined before the annual rate for 1986-87 is prescribed, it is also necessary in the interim period to calculate and to prescribe a rate of interest to apply from 1 Jul 1986. The Trust advised the Commissioner that an amount of $512,351,449 was available for allocation to contributors in respect of the first three quarters ending 31 Mar 1987 of the financial year 1986-87. Having regard to the opening balances of contributors’ accumulations at 1 Jul 1986 and the estimate of net contributions for the first three quarters of the 1986-87 financial year, the Commissioner has calculated that a rate of 20.029% would apportion to individual contributors in the Commonwealth Superannuation Scheme in the period from 1 Jul 1986, the amount that became available for allocation to contributors in that period. The Regulations contained in the Statutory Rule amend the Principal Regulations by prescribing an interest rate of 20.029% for the period commencing on 1 Jul 1986.
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 1987, issued under the authority of the Minister for Finance, were enacted to amend the Superannuation Act 1976 and address the need for updated interest rates applicable to superannuation contributions. The Superannuation Act 1976 was established by the Australian Parliament to regulate superannuation schemes and ensure that contributions are managed and invested appropriately. The policy objective of these regulations is to ensure that the interest rates applied to accumulated contributions and supplementary contributions are reflective of the actual income available for allocation to contributors. These regulations were introduced to ensure that the benefits of contributors leaving the Fund can be accurately determined before the annual rate for 1986-87 is prescribed. The new interest rate of 20.029% applies to contributors under the Act who cease Commonwealth employment on or after the date of gazettal of the Regulations, as well as those persons to whom deferred benefits become payable after the date of gazettal.
Scope and Application
The Superannuation (Interest) Regulations (Amendment) Statutory Rules 1987 No 99 applies to contributors under the Superannuation Act 1976 who have ceased to be contributors on or after the date of gazettal of the Regulations. This includes individuals who cease Commonwealth employment and those to whom deferred benefits become payable post the date of gazettal. The regulations are crafted to ensure that the interest rates prescribed are reflective of the income available for allocation to contributors, as advised by the Superannuation Fund Investment Trust following the Auditor-General’s report on the Trust’s financial statements. The amendment prescribes an interest rate of 20.029% for the period commencing on 1 July 1986, thereby extending the interest rates beyond the previously set rates and ensuring that contributors receive their due interest based on the available income for the specified financial year. The regulations are made under the authority of Section 168 of the Superannuation Act 1976, ensuring they do not conflict with the Act and are necessary for its implementation. The application of these regulations is national in scope, impacting contributors across Australia as they relate to the Commonwealth Superannuation Scheme.
Key Provisions
The Superannuation (Interest) Regulations (Amendment) Statutory Rule, issued under the authority of the Minister for Finance, modifies the Superannuation (Interest) Regulations. According to section 168 of the Superannuation Act 1976, the Governor-General has the authority to establish regulations that are necessary to implement the Act, including prescribing interest rates for accumulated contributions. Under section 7A of the Act, contributors who experience interruptions in their service, such as those who receive invalidity pensions or deferred benefits, are entitled to interest on their contributions during the break in service. Section 145 of the Act requires the Commissioner for Superannuation to pay contributors their share of the surrender value of life assurance policies upon certain events, including the policy maturing or the contributor reaching the minimum retiring age, along with any applicable interest. The amendments in the Statutory Rule prescribe an interest rate of 20.029% for the period beginning on 1 July 1986, applicable to contributors who leave Commonwealth employment on or after the date of gazettal of the Regulations and to those eligible for deferred benefits post-gazettal.
The Superannuation (Interest) Regulations (Amendment) impose specific obligations on contributors and the Commissioner for Superannuation. Contributors who cease employment with the Commonwealth on or after the date of gazettal of these Regulations, and those to whom deferred benefits become payable post-gazettal, are entitled to interest at the rate of 20.029%. This rate is applied to their accumulated contributions from 1 July 1986, ensuring they receive the benefit of the interest rate calculated by the Commissioner. The Commissioner for Superannuation is responsible for calculating the applicable interest rate based on the income available for allocation to contributors and ensuring that contributors receive their entitled interest. Furthermore, the Commissioner must handle the payment of contributors’ shares of the surrender value of life assurance policies, as outlined in section 145 of the Act, along with any applicable interest.
Breaching the provisions of the Superannuation Act 1976 or the amended Superannuation (Interest) Regulations can result in civil or criminal penalties, depending on the nature and severity of the breach. While the specific penalties for non-compliance are not detailed in the Statutory Rule, the Act generally provides for penalties that can include fines and, in more serious cases, imprisonment. The precise penalties would be determined based on the specific provisions breached and the circumstances of the breach, as outlined in the Act. It is important for contributors and the Commissioner for Superannuation to adhere to the regulations to avoid any potential penalties or legal consequences.