Superannuation (Productivity Benefit) (1999-2000 Second Interest Factor) Declaration 1999 1999 No. 137
EXPLANATORY STATEMENT
STATUTORY RULES 1999 No. 137
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 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)(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) (1999-2000 Second Interest Factor) Declaration 1999 specifies that the rate to be used in the formula for the 1999-2000 financial year is 0.0551, which is the rate expressed as a decimal per annum that is the estimated closing yield last published before 1 June 1999, in respect of 10-year non-rebate Treasury Bonds (ie 5.51 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) (1999-2000 Second Interest Factor) Declaration 1999 was enacted to address the need for a specified interest factor in calculating productivity superannuation benefits under the Superannuation (Productivity Benefit) Act 1988. This Act, administered by the Minister for Finance and Administration, aims to ensure that eligible Australian Government employees and certain other employees receive their superannuation contributions, particularly where no other employer-sponsored superannuation cover is available. The Declaration, issued under Section 3E(1)(b) of the Act, specifies the second interest factor for the 1999-2000 financial year, which is used to calculate the interest on superannuation contributions. The policy objective is to maintain accurate and consistent interest calculations on superannuation contributions, thereby ensuring fair and equitable benefits for eligible employees.
Scope and Application
The Superannuation (Productivity Benefit) (1999-2000 Second Interest Factor) Declaration 1999 applies to employers who are designated under the Superannuation (Productivity Benefit) Act 1988, which includes Australian Government employees and certain other employees without employer-sponsored superannuation cover. This legislation pertains specifically to the calculation of the second interest factor used in determining the accrued interest on contributions made under the Act. Geographically, this Act applies across the Commonwealth of Australia, as it is an instrument of federal legislation. The Declaration specifies the interest rate to be used for the 1999-2000 financial year, derived from the estimated closing yield of 10-year non-rebate Treasury Bonds published before 1 June 1999. There are no exclusions, exemptions, or thresholds specified in this Declaration, but it does extend the application of the Superannuation (Productivity Benefit) Act 1988 through the declaration of the specified interest rate.
Key Provisions
The Superannuation (Productivity Benefit) (1999-2000 Second Interest Factor) Declaration 1999 (the Declaration) specifies the second interest factor for the 1999-2000 financial year as 0.0551, as required under section 3E(1)(b) of the Superannuation (Productivity Benefit) Act 1988 (the PB Act). This factor is crucial for determining the interest that accrues on certain superannuation contributions and benefits. The interest factor is derived from the estimated closing yield of 10-year non-rebate Treasury Bonds, published before 1 June 1999, which was 5.51 per cent per annum. Section 8A(2) of the PB Act outlines that this interest factor is used to calculate the interest on amounts accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 up to 30 June 1990, as well as on contributions that should have been made between 1 July 1990 and the year in which the payment is made, and the interest on these contributions.
The Declaration imposes specific obligations on employers who are designated under the PB Act. These employers must ensure they pay the appropriate interest on superannuation contributions based on the declared second interest factor. This includes calculating the interest on amounts accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 and on contributions that should have been made but were not, along with the interest on those contributions. Employers are also required to remit these calculated amounts to the superannuation fund nominated by the Minister for Finance and Administration or another approved fund. This ensures that employees eligible for productivity superannuation benefits receive the correct interest accruals on their superannuation contributions.
The PB Act does not explicitly state civil or criminal penalties for non-compliance with the requirements to declare and use the second interest factor. However, the failure to accurately calculate and pay the interest as specified could result in financial discrepancies and potential audits by the Australian Taxation Office or the Australian Prudential Regulation Authority. Employers are expected to maintain accurate records and calculations to avoid any disputes or penalties related to superannuation contributions and interest. While the Declaration itself does not outline specific penalties, general superannuation laws provide for penalties including fines and imprisonment for serious breaches, highlighting the importance of compliance.