EXPLANATORY STATEMENT
STATUTORY RULES 1987 NO. 199
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.
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 person’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 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) 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 to 1985-86, the last being 16.714% for 1985-86. The Principal Regulations also prescribed the rate of interest to apply from 1 July 1986, which was 20.029%.
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 financial 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 July 1986. The Trust advised the Commissioner that an amount of $802,253,264 was available for allocation to contributors in respect of the financial year 1986-87. Having regard to the opening balances of contributors’ accumulations at 1 July 1986 and the estimate of net contributions for the 1986-87 financial year, the Commissioner has calculated that a rate of 22.973% would apportion to individual contributors in the Commonwealth Superannuation Scheme in the period from 1 July 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 22.973% for the period commencing on 1 July 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.