Superannuation (Productivity Benefit) 1994-1995 Second Interest Factor Declaration 1994 No. 210
EXPLANATORY STATEMENT
STATUTORY RULES 1994 No. 210
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 employer sponsored 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 8A (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 years 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 1994-95 financial year is 0.0845, which is the rate expressed as a decimal per annum that is the estimated closing yield last published before 1 June 1994 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 1994.
Overview
The Superannuation (Productivity Benefit) 1994-1995 Second Interest Factor Declaration 1994 No. 210 was enacted to provide for the calculation of a second interest factor under the Superannuation (Productivity Benefit) Act 1988. This Act aims to ensure that Australian Government employees without employer-sponsored superannuation coverage receive productivity benefits. The declaration was issued under the authority of the Minister for Finance, as mandated by section 3E (1) (b) of the Act, and it identifies a policy objective to establish a consistent and reliable method for calculating interest on superannuation contributions and accrued benefits for eligible employees. This statutory rule specifies the interest factor for the 1994-1995 financial year and sets the rate to be used in the formula at 0.0845, based on the estimated closing yield of 10-year non-rebate Treasury Bonds published before 1 June 1994. The declaration aims to ensure that interest accrues accurately on amounts that had accumulated prior to an employee becoming a member of a fund or being entitled to a benefit, effective from 1 July 1994.
Scope and Application
The Superannuation (Productivity Benefit) 1994-1995 Second Interest Factor Declaration 1994 No. 210 applies to employers designated under the Superannuation (Productivity Benefit) Act 1988, specifically those responsible for Australian Government employees who do not have other employer-sponsored superannuation coverage. This includes federal government agencies or entities that employ such individuals. The legislation requires these employers to make periodic contributions to a superannuation fund, either the one nominated by the Minister for Finance or another approved by the Minister, based on the salary of the employee. These contributions include amounts for any entitlements accrued under the Superannuation Benefit (Interim Arrangement) Act 1988, as well as any contributions that would have been made had the employee joined a fund on 1 July 1990. The Act also mandates that employers pay interest on contributions that are not made in a timely manner. The declaration under section 3E (1) (b) of the Act sets the second interest factor for the 1994-95 financial year, which is used to determine the interest that accrues on specified amounts within the superannuation framework. The declaration is effective from 1 July 1994 and extends to all relevant financial transactions during that period.
Key Provisions
The Superannuation (Productivity Benefit) 1994-1995 Second Interest Factor Declaration 1994 No. 210 is an instrument under the Superannuation (Productivity Benefit) Act 1988. It mandates the Minister for Finance to declare the second interest factor, which is used to calculate interest accruing on superannuation benefits for Australian Government employees who are not covered by any other employer-sponsored superannuation scheme. According to section 3E(1)(b) of the Act, the Minister is required to ascertain this factor using a specified formula before each financial year and declare it as the second interest factor for that year. This factor is integral to determining the interest that accrues on superannuation benefits and unpaid contributions.
The Act imposes several obligations on designated employers. These include making periodic contributions to either the superannuation fund nominated by the Minister or another approved fund, based on the employee's salary. Employers must also make a one-off payment to the same fund, which includes the employee's entitlement accrued under the former Superannuation Benefit (Interim Arrangement) Act 1988, as well as any contributions that should have been made post-1 July 1990. Additionally, employers are required to pay interest on any unpaid contributions. The declared second interest factor is used to calculate the interest that accrues on these amounts.
Section 8A(2) of the Act specifies that the second interest factor is used to calculate the interest on three main categories of superannuation benefits: the amount accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 up to 30 June 1990, amounts that should have been paid as continuing contributions in financial years starting after 1 July 1990 but before the year of payment, and interest on these unpaid contributions. The declared rate for the 1994-95 financial year is 0.0845, representing the estimated closing yield of 10-year non-rebate Treasury Bonds last published before 1 June 1994. This interest accrues on a daily basis from the date each amount was accrued until the person becomes a member of a fund or is entitled to a benefit.
Breaches of the obligations and requirements under the Act may result in various civil or criminal consequences. Employers who fail to make the required contributions or interest payments may face legal action from employees, and there could be financial penalties imposed. The specific consequences and penalties for non-compliance are not detailed in the explanatory statement but would generally include fines and potentially legal proceedings for financial recovery or enforcement. The Act's provisions ensure that employers adhere to their obligations to provide and maintain the superannuation benefits for eligible employees.