Superannuation (Productivity Benefit) 1995-96 Second Interest Factor Declaration 1995 No. 176
EXPLANATORY STATEMENT
STATUTORY RULES 1995 No. 176
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 PB 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 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 to pay to the same fund, on a once only basis, an amount being the entitlement accrued under the then 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 1995-96 financial year is 0.0970, which is the rate expressed as a decimal per annum that is the estimated closing yield last published before 1 June 1995 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 1995.
Overview
The Superannuation (Productivity Benefit) 1995-96 Second Interest Factor Declaration 1995 No. 176, issued under the authority of the Minister for Finance, was enacted to address the need for a specified interest rate to be used for calculating productivity superannuation benefits for Australian government employees without other employer-sponsored superannuation coverage. This statutory rule was formulated in accordance with Section 3E(1)(b) of the Superannuation (Productivity Benefit) Act 1988, which mandates the declaration of a second interest factor for each financial year to determine the interest accruing on certain superannuation amounts. The policy objective is to ensure that the interest factor applied is based on a formula involving a rate that reflects the estimated yield of 10-year non-rebate Treasury Bonds, thereby providing a consistent and fair method for calculating interest on superannuation contributions and entitlements. This declaration ensures that employers and employees have clarity on the interest rates applied to their superannuation benefits for the financial year 1995-96.
Scope and Application
The Superannuation (Productivity Benefit) 1995-96 Second Interest Factor Declaration 1995 No. 176 applies to designated employers of Australian Government employees who lack other employer-sponsored superannuation coverage, as mandated by the Superannuation (Productivity Benefit) Act 1988. These employers are required to make periodic contributions to a superannuation fund nominated by the Minister for Finance or an approved alternative, based on the employee's salary. This declaration outlines the second interest factor to be used for the 1995-96 financial year, which is integral for determining the interest that accrues on amounts that should have been paid as continuing contributions and interest on those contributions. The interest factor specified in the declaration is derived from the estimated closing yield of 10-year non-rebate Treasury Bonds, published before 1 June 1995, and is used to compute the interest that accrues on amounts that had accumulated prior to the employee joining a fund or becoming entitled to a benefit. The declaration, which commences on 1 July 1995, is a statutory instrument that extends the application of the Superannuation (Productivity Benefit) Act 1988 by setting a specific rate for the second interest factor for that financial year.
Key Provisions
The Superannuation (Productivity Benefit) Act 1988 provides a framework for productivity superannuation for Australian Government employees without other employer-sponsored superannuation coverage. Under Section 3E(1)(b), the Minister for Finance is required to declare annually the second interest factor, which is used to determine the interest accrued on superannuation amounts. For the 1995-96 financial year, the declared second interest factor is 0.0970, based on the estimated closing yield of 10-year non-rebate Treasury Bonds as of the previous 1 June.
Employers designated under the Act are obligated to make periodic contributions to a superannuation fund either nominated by the Minister for Finance or another approved fund. These contributions are based on the employee's salary and are to be made from 1 July 1990 onwards. Employers must also remit an amount equal to the entitlement accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 and an amount for contributions that would have been made had the employee joined a fund on 1 July 1990. Additionally, employers must pay extra amounts as interest on any contributions that are not made on time.
The Act imposes clear obligations on employers to ensure that contributions are made accurately and on time, and to calculate interest on any late contributions. Failure to comply with these requirements can result in financial penalties and interest charges. The Act provides for enforcement through civil and criminal penalties, although specific maximum penalties are not detailed in the explanatory statement.
Breaching the requirements of the Act, such as failing to make the required contributions or to accurately calculate interest, can lead to legal consequences. While the specific penalties are not outlined in the explanatory statement, breaches may result in civil penalties, which could include fines, or criminal penalties, which might involve imprisonment or fines, depending on the severity of the breach. The Act also provides for interest to accrue on any unpaid amounts, compounding the financial consequences of non-compliance.