Superannuation (Productivity Benefit) 1993-1994 Second Interest Factor Declaration 1993 No. 185
EXPLANATORY STATEMENT
STATUTORY RULES 1993 No. 185
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE
DECLARATION UNDER SECTION 3E (1) (b)
SECOND INTEREST FACTOR
The Superannuation (Productivity Benefit) Act 1988 (the Act) provides the mechanism by which productivity superannuation is made available to Australian Government employees who have no other employersponsored superannuation coverage.
From 1 July 1990 the designated employers of such employees are required to pay to either the superannuation fund nominated by the Minister for Finance, or another superannuation fund approved by the Minister, periodic contributions based on the salary of the employee.
Employers are required as well to pay to the same fund, on a once-only basis, an amount being the entitlement accrued by the employee under the former Superannuation Benefit (Interim Arrangement) Act 1988 and an amount in respect of contributions which would have been paid after 1 July 1990 had the employee joined a fund on that date. The employer is required to pay extra amounts as interest on any contributions which are not made.
Paragraph 3E (1) (b) of the Act requires the Minister to declare before each financial year "the factor ascertained using a specified formula that is to be the declared second interest factor for that year". Subsection 3 (E)(2) of the Act provides that the formula "is to involve the use of a rate specified in the Declaration" and "may contain a variable that depends on the period, or another aspect, of the employment of the person in relation to whom the factor is to apply".
The second interest factor is used in subsection 8 A (2) of the Act to determine the amount that is to accrue during all or part of a financial year on:
• the amount accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 up to 30 June 1990;
• amounts which should have been paid (but were not) as continuing contributions in financial yews commencing on or after 1 July 1990 but before the year in which the payment is made; and
• amounts which would have accumulated as interest on continuing contributions in financial years following 1 July 1990 but before the year in which payment is made.
The declaration specifies that the rate to be used in the formula for 1993-94 financial year is 0.0755, which is the rate expressed as a decimal per annum that is the estimated closing yield last published before 1 June 1993 in respect of 10-year non-rebate Treasury Bonds.
The effect of this formula is that interest accrues on a daily basis on each amount which had accrued prior to the date on which the person became a member of a fund or entitled to a benefit.
The Declaration commences on 1 July 1993.
Overview
The Superannuation (Productivity Benefit) 1993-1994 Second Interest Factor Declaration 1993 was issued under the authority of the Minister for Finance to address the need for a specific interest rate calculation for the 1993-1994 financial year, as mandated by the Superannuation (Productivity Benefit) Act 1988. This Act provides a means for Australian Government employees without employer-sponsored superannuation coverage to receive productivity superannuation. The explanatory statement clarifies that the Minister must declare an interest factor before each financial year, calculated using a specified formula, which is used to determine the interest accruing on certain superannuation amounts. The 1993-1994 Declaration sets the second interest factor at 0.0755, based on the estimated closing yield of 10-year non-rebate Treasury Bonds as of 1 June 1993. This ensures that interest accrues daily on superannuation amounts prior to the individual becoming a member of a fund or being entitled to a benefit. The declaration is effective from 1 July 1993.
Scope and Application
The Superannuation (Productivity Benefit) 1993-1994 Second Interest Factor Declaration 1993 No. 185 applies to Australian Government employees who do not have any other employer-sponsored superannuation coverage. It specifies the second interest factor for determining the interest accruing on superannuation contributions for the financial year 1993-1994 under the Superannuation (Productivity Benefit) Act 1988. The declared rate for this period is 0.0755, calculated based on the estimated closing yield of 10-year non-rebate Treasury Bonds as of 1 June 1993. This declaration is made under the authority of the Minister for Finance and comes into effect on 1 July 1993. The interest factor is used to calculate the accrual of interest on amounts that had accumulated prior to the employee joining a superannuation fund or becoming entitled to a benefit. This interest is applied to contributions that should have been made from 1 July 1990 onwards and any unpaid interest on those contributions.
Key Provisions
The Superannuation (Productivity Benefit) 1993-1994 Second Interest Factor Declaration 1993 No. 185, issued under the authority of the Minister for Finance, provides an essential framework for the calculation of productivity superannuation benefits for Australian Government employees. Section 3E(1)(b) of the Superannuation (Productivity Benefit) Act 1988 mandates that the Minister must declare an interest factor for each financial year, a requirement which is fulfilled by this declaration. The second interest factor for the 1993-1994 financial year is set at 0.0755, which corresponds to the estimated closing yield on 10-year non-rebate Treasury Bonds as of the last publication before 1 June 1993.
Under the Act, employers of Australian Government employees who lack other employer-sponsored superannuation coverage are obligated to make periodic contributions to a superannuation fund. These contributions are based on the employee's salary and are directed to either the superannuation fund nominated by the Minister for Finance or another approved fund. Additionally, employers must remit a one-time payment covering the employee's accrued entitlement under the Superannuation Benefit (Interim Arrangement) Act 1988 and any contributions that would have been made had the employee joined a fund on 1 July 1990. Employers are also required to account for any interest accruing on delayed contributions. These obligations are clearly outlined in sections 8A(2) and 8A(3) of the Act, which detail the calculations for accruing interest on various superannuation amounts.
Failure to comply with the requirements set forth in the Superannuation (Productivity Benefit) Act 1988 may result in significant consequences. The Act includes provisions for both civil and criminal penalties for non-compliance. Civil penalties may be enforced through administrative actions, including fines, and are designed to ensure that employers adhere to their obligations. In cases of more severe non-compliance, criminal penalties may apply, which can include imprisonment or substantial fines, depending on the severity of the breach. The exact penalties are detailed within the Act, ensuring that all parties are aware of the potential repercussions of failing to meet their obligations.