Superannuation (Productivity Benefit) 1998-99 Second Interest Factor
Declaration 1998 No. 172
EXPLANATORY STATEMENT
STATUTORY RULES 1998 No. 172
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE AND ADMINISTRATION
DECLARATION UNDER SECTION 3E(1)(b)
SECOND INTEREST FACTOR
The Superannuation (Productivity Benefit) Act 1988 (the PB Act) provides the mechanism by which the Superannuation Guarantee (SG) minimum superannuation contribution is made available to Australian Government employees (and certain other employees) who have no other employer-sponsored superannuation cover. Prior to 1 July 1992, the PB Act provided productivity superannuation to these employees.
Since 1 July 1990, the designated employers of employees covered by the PB Act arrangements have been required to pay periodic contributions based on the salary of the employee to the superannuation fund nominated by the Minister for Finance and Administration, or another superannuation fund approved by the Minister. Where the employee is eligible, contributions may be paid to a regulated fund as defined by the Superannuation Industry Supervision legislation.
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)(b) of the PB 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 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 second interest factor is used in subsection 8A(2) of the PB 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 the payment is made.
This Declaration cited as the Superannuation (Productivity Benefit) 1998-99 Second Interest Factor Declaration specifies that the rate to be used in the formula for the 1998-99 financial year is 0.0589, which is the rate expressed as a decimal per annum, that is the estimated closing yield last published before 1 June 1998, in respect of 10-year non-rebate Treasury Bonds (ie 5.89 per cent per annum).
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 commenced on gazettal.
Overview
The Superannuation (Productivity Benefit) Act 1988 was enacted to ensure that Australian Government employees, along with certain other employees, receive a minimum level of superannuation contributions, known as the Superannuation Guarantee (SG), if they do not have any other employer-sponsored superannuation cover. This legislation was introduced to fill a gap in providing adequate retirement savings for these employees. The policy objective of the Act is to mandate designated employers to make periodic contributions to a superannuation fund on behalf of eligible employees. The Act also requires employers to pay interest on contributions to compensate for any lost interest since the contributions began to accumulate. The Superannuation (Productivity Benefit) 1998-99 Second Interest Factor Declaration, issued by the Minister for Finance and Administration, specifies the second interest factor for the 1998-99 financial year, which is used to calculate the interest accruals on superannuation amounts. This Declaration ensures that interest is computed daily on the amounts accrued prior to the date of membership or entitlement to a benefit, thereby maintaining the integrity of the superannuation benefits system.
Scope and Application
The Superannuation (Productivity Benefit) 1998-99 Second Interest Factor Declaration 1998 No. 172 applies to Australian Government employees and certain other employees who are not covered by other employer-sponsored superannuation arrangements, ensuring they receive the Superannuation Guarantee (SG) minimum contribution. Employers who are designated under the Superannuation (Productivity Benefit) Act 1988 (the PB Act) are required to make periodic contributions to a superannuation fund, which can be either nominated by the Minister for Finance and Administration or approved by the Minister. The contributions must account for the interest lost due to delayed payments and are calculated using the second interest factor declared by the Minister. The geographic reach of this legislation is national, applying to all eligible employees across Australia. The Act does not explicitly state exclusions or exemptions, but it is inherently limited to those employees not already covered by another employer-sponsored superannuation scheme. The application of the Act may be extended or restricted through subordinate instruments as needed.
Key Provisions
The Superannuation (Productivity Benefit) 1998-99 Second Interest Factor Declaration 1998 No. 172, under the Superannuation (Productivity Benefit) Act 1988 (the PB Act), establishes the second interest factor for the financial year 1998-99. This declaration, referenced under section 3E(1)(b) of the PB Act, specifies the rate to be used in the formula for calculating interest accruals on superannuation benefits for eligible employees (sections 3E(1)(b) and 3E(2)). For the specified financial year, the rate is set at 0.0589, which corresponds to the estimated closing yield of 10-year non-rebate Treasury Bonds last published before 1 June 1998 (5.89% per annum). This factor is pivotal in determining the interest accruing on amounts from the Superannuation Benefit (Interim Arrangement) Act 1988, continuing contributions missed between 1 July 1990 and the payment date, and interest on those contributions.
The PB Act imposes specific obligations on employers to ensure compliance with the superannuation requirements for eligible employees. These employers must pay periodic contributions based on the employee's salary to the superannuation fund nominated by the Minister for Finance and Administration or an approved alternative (section 3E(1)(a)). Additionally, employers are required to make a once-off payment to cover the employee's entitlement accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 up to 30 June 1990, along with interest on contributions that would have been made since 1 July 1990 (section 8A(2)). Employers must also pay interest on these contributions to account for the loss of interest from the time contributions began to accumulate until they are paid into a fund.
Failure to comply with the provisions of the PB Act and the associated regulations may result in legal consequences. The Act provides for both civil and criminal penalties for non-compliance. Civil penalties may include fines and other monetary penalties as prescribed by the relevant legislation, depending on the nature and severity of the breach. In cases where the breach is considered to be of a serious nature, criminal penalties may apply, which can include imprisonment. The specific penalties are detailed in the relevant sections of the PB Act and any subordinate legislation.