Superannuation (Productivity Benefit) 1997-98 First Interest Factor
Declaration 1997 No. 145
EXPLANATORY STATEMENT
STATUTORY RULES 1997 No. 145
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE
DECLARATION UNDER SECTION 3E(1)(a)
FIRST INTEREST FACTOR
The Superannuation (Productivity Benefit) Act 1988 (the PB Act) provides the mechanism by which the Superannuation Guarantee (SG) is made available to Australian Government employees who have no other employer sponsored superannuation coverage. Prior to 1 July 1992, the PB Act provided productivity superannuation to these employees.
Since 1 July 1990 the designated employees of such employers have been required to pay to the superannuation fund nominated by the Minister for Finance, or another superannuation fund approved by the Minister, or to a regulated fund under the Superannuation Industry Supervision legislation (where the employee is eligible), 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 made to take account of loss of interest since contributions began to accumulate on behalf of the employee and before such contributions are paid into a fund.
Paragraph 3E(1)(a) of the PB Act required the Minister to declare before each financial year "the factor ascertained using a specified formula that is to be the declared first interest factor for that year". Subsection 3E(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 first 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 amounts which should have been paid to a superannuation fund as contributions in that year.
The declaration specifies that the rate to be used in the formula for the 1997-98 year is 0.0783 ), which is the rate expressed as a decimal per annum that is the estimated closing yield last published before 1 June 1997 in respect of 10-year non-rebate Treasury Bonds (ie 7.83 per cent. per annum).
The effect of the formula is to accrue interest in a manner similar to that which would have applied if the contributions had been paid into a fund in regular payments throughout the year. The formula provides for interest to accrue on a daily basis on each amount which should have been paid (but was not) to a fund during the period 1 July 1997 to 30 June 1998 at half the rate set out in the declaration. The halving of the interest rate recognises that the full interest rate only applies for a full year, and applies for progressively shorter periods to moneys which would have been payable later in the year. The rate would apply for zero days to amounts payable on the last day of the financial year.
The Declaration commences on 1 July 1997.
Overview
The Superannuation (Productivity Benefit) 1988, enacted by the Australian Parliament, addresses the need for superannuation coverage for employees of the Australian Government who do not have employer-sponsored superannuation. The Act aims to provide a mechanism through which the Superannuation Guarantee can be extended to these employees. To implement this, the Minister for Finance is mandated to declare the first interest factor for each financial year under section 3E(1)(a) of the Act. The policy objective is to ensure that interest accrues on unpaid superannuation contributions in a manner that reflects the expected yield from a 10-year non-rebate Treasury Bond, thereby maintaining the integrity of the superannuation system. The First Interest Factor Declaration 1997 No. 145 specifies the rate for the 1997-98 financial year, which is 0.0783, derived from the estimated closing yield of 10-year non-rebate Treasury Bonds published before 1 June 1997.
Scope and Application
The Superannuation (Productivity Benefit) 1997-98 First Interest Factor Declaration 1997 No. 145 applies to the application of the Superannuation (Productivity Benefit) Act 1988, specifically concerning the determination of the first interest factor for the financial year 1997-98. This legislation pertains to employees and employers within the Australian Government who are subject to the Superannuation Guarantee provisions and have no other employer-sponsored superannuation coverage. The declaration ensures that the interest on superannuation contributions for eligible employees is calculated correctly, with the interest rate set at 0.0783 per annum, which is half of the estimated closing yield of 10-year non-rebate Treasury Bonds as of 1 June 1997. The Act extends its application across the Commonwealth, impacting the financial obligations and entitlements of employers and employees within the specified criteria, with no stated exclusions or exemptions in this particular declaration.
Key Provisions
The Superannuation (Productivity Benefit) 1997-98 First Interest Factor Declaration 1997 No. 145 outlines the mechanism by which the Superannuation Guarantee (SG) is provided to Australian Government employees without other employer-sponsored superannuation coverage. Under section 3E(1)(a) of the Superannuation (Productivity Benefit) Act 1988 (PB Act), the Minister for Finance is required to declare a first interest factor each financial year. This factor, determined using a specified formula, is used to calculate the interest that accrues on unpaid superannuation contributions. For the 1997-98 financial year, the declared first interest factor is 0.0783, reflecting the estimated closing yield of 10-year non-rebate Treasury Bonds published before 1 June 1997. The formula applies this rate on a daily basis, halved to account for the shorter periods of unpaid contributions throughout the year.
The Act imposes several obligations on the parties involved. Employees who are eligible for the Productivity Benefit are required to make periodic contributions to a superannuation fund nominated by the Minister or another approved fund. Employers, in turn, must match these contributions and pay additional amounts as interest to compensate for the loss of interest that would have accrued if the contributions had been paid on time. The interest is calculated using the declared first interest factor, ensuring that the contributions accumulate in a manner consistent with regular annual payments.
Failure to comply with the requirements set out in the PB Act can result in legal consequences. Both employees and employers who do not meet their obligations may face penalties, although specific details regarding the nature and extent of these penalties are not provided in the explanatory statement. Given the nature of the Act, penalties may include financial sanctions or other enforcement actions aimed at ensuring compliance with superannuation requirements.
In summary, the Superannuation (Productivity Benefit) 1997-98 First Interest Factor Declaration 1997 No. 145 establishes the first interest factor for the 1997-98 financial year, sets out the obligations for employees and employers to contribute to and pay interest on superannuation, and implies potential consequences for non-compliance with the Act’s provisions.