Superannuation (Productivity Benefit) (1999-2000 First Interest Factor) Declaration 1999 1999 No. 136
EXPLANATORY STATEMENT
STATUTORY RULES 1999 No. 136
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE AND ADMINISTRATION
DECLARATION UNDER PARAGRAPH 3E(1)(a)
FIRST 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 employersponsored 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)(a) 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 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 PB 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.
This Declaration cited as the Superannuation (Productivity Benefit) (1999-2000 First Interest Factor) Declaration 1999 specifies that the rate to be used in the formula for the 1999-2000 year is 0.055 1, which is the rate expressed as a decimal per annum that is the estimated closing yield last published before 1 July 1999, in respect of 10-year non-rebate Treasury Bonds (ie 5.5 1 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 1999 to 30 June 2000 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 late in the year. The rate could apply for zero days to amounts payable on the last day of the financial year.
The Declaration commenced on gazettal.
Overview
The Superannuation (Productivity Benefit) (1999-2000 First Interest Factor) Declaration 1999 was enacted in 1999 to provide the necessary framework for calculating the first interest factor as required under the Superannuation (Productivity Benefit) Act 1988. This Act was introduced to address the need for a systematic approach to the calculation of interest on superannuation contributions that were supposed to be made to eligible employees but were delayed. The declaration was made under the authority of the Minister for Finance and Administration and was designed to ensure that the interest rate used in these calculations was aligned with prevailing economic conditions, specifically referencing the estimated closing yield of 10-year non-rebate Treasury Bonds. The policy objective of this declaration was to maintain consistency and fairness in the calculation of superannuation benefits, ensuring that interest accrued in a manner that reflects the loss of opportunity for investment due to delayed contributions.
Scope and Application
The Superannuation (Productivity Benefit) (1999-2000 First Interest Factor) Declaration 1999 applies to Australian Government employees and certain other employees who are eligible for the Superannuation Guarantee (SG) under the Superannuation (Productivity Benefit) Act 1988. This Act aims to ensure that employees who do not have other employer-sponsored superannuation cover receive a minimum level of superannuation contributions. Employers of eligible employees are required to make periodic contributions to the superannuation fund nominated by the Minister for Finance and Administration or an approved alternative. The Declaration specifies the interest rate to be used for calculating the amount that accrues during the 1999-2000 financial year on contributions that should have been paid but were not. The interest rate declared for this period is 0.0551, which is half the estimated closing yield of 10-year non-rebate Treasury Bonds as of 30 June 1999. This rate is applied on a daily basis to the unpaid contributions, adjusting for the period during which the interest would have accrued. The Declaration is effective from the date of its gazettal and is an instrument under the PB Act that provides for the calculation of interest on unpaid superannuation contributions.
Key Provisions
The Superannuation (Productivity Benefit) (1999-2000 First Interest Factor) Declaration 1999 (paragraph 3E(1)(a)) sets out the specific interest rate to be used in calculating the productivity benefit for superannuation contributions for the financial year 1999-2000. This rate, declared by the Minister for Finance and Administration, is 0.0551 per annum (or 5.51% per annum), based on the estimated closing yield of 10-year non-rebate Treasury Bonds published before 1 July 1999 (section 1). This interest rate is used to determine the amount that accrues on contributions that should have been made to a superannuation fund during that financial year. The formula applied under subsection 8A(2) of the Superannuation (Productivity Benefit) Act 1988 ensures that interest accrues on a daily basis at half the declared rate, reflecting the shorter periods for which interest would have been earned had the contributions been made on time (section 1).
Under the Superannuation (Productivity Benefit) Act 1988, employers are required to make periodic contributions to a superannuation fund for employees who are not covered by another employer-sponsored superannuation scheme. These contributions must be based on the employee's salary and must be made to a fund nominated by the Minister or an approved fund (section 3). Employers must also make a lump-sum payment to account for the employee's entitlement accrued under the Superannuation Benefit (Interim Arrangement) Act 1988, as well as for contributions that would have been made since 1 July 1990 (section 3). Additionally, employers must pay interest on late contributions to compensate for the loss of interest that would have been earned if the contributions had been made on time (section 3).
The Act imposes several obligations on employers, including the timely and accurate calculation and payment of contributions based on the employee's salary, the payment of the declared interest on late contributions, and the adherence to the specified formula for calculating interest (section 3). Employers must also ensure that contributions are made to a fund approved by the Minister or another regulated fund as defined under the Superannuation Industry Supervision legislation (section 3). Failure to comply with these obligations may result in financial penalties and legal consequences.
There are no specific offences or penalties detailed in the Declaration itself, but the Superannuation (Productivity Benefit) Act 1988 provides for various penalties for non-compliance. These may include civil penalties for failure to make contributions, with the penalty being equal to the amount of the unpaid contribution plus interest (section 27). Additionally, criminal penalties may apply for willful or negligent breaches, with fines and imprisonment possible depending on the severity and intent of the breach (section 28). The exact penalties are determined by the courts and may vary based on the circumstances of each case.