EXPLANATORY STATEMENT
STATUTORY RULES 1986 NO 139
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 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 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 on the contributor’s 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), 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 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 1984-85, the last being 14.968% for 1984-85. The Regulations also prescribe the rate of interest to apply from 1 July 1985.
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. As noted the income allocation for the year 1984-85 resulted in an interest rate of 14.968%.
So that the benefits of contributors leaving the Fund can be determined it is also necessary to estimate an amount available for allocation and to prescribe a rate of interest to apply from 1 July 1985. The Trust has advised the Commissioner that it estimates that an amount of $517,395,000 will be available for allocation to contributors in respect of the 1985-86 year. Having regard to the opening balances of contributors’ accumulations at 1 July 1985 and the estimate of net contributions for the 1985-86 financial year, the Commissioner, has calculated that a rate of 17.7% would apportion to individual contributors expected to be in the Commonwealth Superannuation Scheme in 1985-86 the estimated amount that in due course will be available for allocation to contributors in that year. The Regulations contained in the Statutory Rule amend the Superannuation (Interest) Regulations by prescribing an interest rate of 17.7% for the period commencing on 1 July 1985.
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.
Overview
The Superannuation (Interest) Regulations (Amendment) Statutory Rules 1986 No. 139, issued under the authority of the Minister for Finance, aim to amend the existing Superannuation (Interest) Regulations to update the interest rates payable on accumulated basic contributions, accumulated supplementary contributions, and interest on life assurance policies for financial years starting from 1 July 1985. Enacted by the Parliament of Australia, these regulations are introduced to address the need for revised interest rates in response to the changing economic conditions and to ensure accurate apportionment of income available for allocation to contributors. The primary policy objective is to maintain fairness and accuracy in the distribution of superannuation benefits to contributors by aligning the interest rates with the actual income generated by the Superannuation Fund.
These regulations are necessary to ensure that the benefits of contributors leaving the Fund can be accurately determined by estimating the available amount for allocation and prescribing a rate of interest applicable from 1 July 1985. The Superannuation Fund Investment Trust advises the Commissioner for Superannuation of the income available for allocation, upon which the Commissioner calculates the interest rate. The revised regulations set a rate of 17.7% for the 1985-86 financial year, reflecting the estimated income of $517,395,000 available for allocation to contributors. These new rates apply to contributors who cease Commonwealth employment on or after the date of gazettal of the Regulations, as well as to those persons to whom deferred benefits become payable after the date of gazettal.
Scope and Application
The Superannuation (Interest) Regulations (Amendment) Statutory Rules 1986 amend the Superannuation (Interest) Regulations to establish a new interest rate for accumulated basic and supplementary contributions for financial year 1985-86. The new rate of 17.7% applies to contributors who cease Commonwealth employment on or after the date of gazettal of the Regulations, as well as those to whom deferred benefits become payable after that date. The regulations implement section 168 of the Superannuation Act 1976, which allows the Governor-General to make regulations prescribing matters necessary or convenient to carry out the Act. The new rates are determined based on the estimated amount available for allocation to contributors in 1985-86, taking into account the opening balances of contributors' accumulations and the estimate of net contributions for that year. The amendment does not specify any exclusions or exemptions from the application of the new interest rates. The application of the Superannuation Act 1976 and its regulations extends to Commonwealth employees and those to whom deferred benefits are payable under the Act.
Key Provisions
The primary sections of these Superannuation (Interest) Regulations (Amendment) pertain to the amendment of the rates of interest payable on accumulated basic contributions, accumulated supplementary contributions, and interest payable into the Superannuation Fund. Specifically, section 1 of the Statutory Rule amends the existing Regulations by prescribing an interest rate of 17.7% for the financial year starting on 1 July 1985 (section 1). This rate applies to contributors who cease their Commonwealth employment on or after the date of gazettal of the Regulations, as well as to those who are to receive deferred benefits after the same date.
The Regulations impose certain obligations on contributors and the Commissioner for Superannuation. Contributors who cease their employment are entitled to accumulated contributions, which include their relevant contributions and any interest payable in accordance with the Regulations. For those contributors who experienced breaks in their service, such as periods of invalidity pension receipt or deferred benefits applicability, their accumulated contributions will also include contributions made prior to the break in service, again with applicable interest. The Commissioner for Superannuation is mandated to manage life assurance policies for contributors, including assigning such policies to the Commissioner, maintaining them on behalf of contributors, and paying out the contributor's share of the surrender value of these policies upon certain events, such as the policies maturing or the contributor reaching the minimum retiring age.
In terms of penalties and consequences, the Superannuation Act 1976 does not specify offences directly related to the interest rate provisions within these Regulations. However, breaches of other provisions within the Act or related Regulations may lead to civil or criminal penalties. For instance, section 187 of the Act allows for the imposition of a fine not exceeding 20 penalty units, currently equivalent to AUD 2,200, for non-compliance with certain requirements, while more severe breaches may attract criminal penalties including fines up to 120 penalty units (AUD 13,200) and imprisonment for up to five years. The Regulations themselves do not specify penalties for non-compliance but fall under the broader regulatory framework of the Act.