Superannuation (Productivity Benefit) (2000-2001 First Interest Factor Declaration) 2000 No. 167
EXPLANATORY STATEMENT
STATUTORY RULES 2000 No. 167
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 employer superannuation support is made available to Commonwealth sector 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 to the superannuation fund nominated by the Minister for Finance and Administration, or another superannuation fund approved by the Minister, or to a regulated superannuation 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 any entitlement accrued under the then Superannuation Benefit (Interim Arrangement) Act 1988 in respect of employment with that employer. Employers are also required to pay an amount in respect of contributions which would have been paid after 1 July 1990 to an employee had the employee been employed by that employer and 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 were due to be paid 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 but were not paid on time.
This Declaration cited as the Superannuation (Productivity Benefit) (2000-2001 First Interest Factor Declaration) specifies that the rate to be used in the formula for the 20002001 year is 0.0639, which is the 10 year Treasury Bond rate at April 2000 expressed as a decimal.
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 2000 to 30 June 2001 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 Declaration commenced on gazettal.
Overview
The Superannuation (Productivity Benefit) (2000-2001 First Interest Factor Declaration) 2000 No. 167 was enacted to address the need for determining the interest factor for superannuation contributions that were not paid on time for the financial year 2000-2001 under the Superannuation (Productivity Benefit) Act 1988. This legislative instrument was issued by the authority of the Minister for Finance and Administration, in line with the requirements of the PB Act, which mandates the declaration of a first interest factor before each financial year. The policy objective of this declaration is to ensure the fair and accurate accrual of interest on late superannuation contributions, providing a consistent and predictable method for employers to calculate the interest that should be paid on behalf of employees. The declared first interest factor for the 2000-2001 financial year is 0.0639, derived from the 10-year Treasury Bond rate at April 2000. This factor ensures that interest accrues in a manner that mirrors the regular payment of contributions, with the rate halved to account for the shorter periods during which the full interest rate would apply.
Scope and Application
The Superannuation (Productivity Benefit) (2000-2001 First Interest Factor Declaration) 2000 No. 167 pertains to employers under the Superannuation (Productivity Benefit) Act 1988, specifically those designated employers who are obligated to make contributions to a superannuation fund for employees covered by the Act. This includes Commonwealth sector employees and certain other employees without other employer-sponsored superannuation cover. The Act applies to contributions due from 1 July 2000 to 30 June 2001 and requires these employers to pay interest on late contributions using a specified formula. This formula involves a first interest factor of 0.0639, based on the 10-year Treasury Bond rate at April 2000, which is halved to reflect the shorter accrual periods for late payments. The declaration, issued by the Minister for Finance and Administration, ensures that interest is accrued in a manner that simulates regular annual payments, thereby compensating for the delayed contributions. The Act operates within the Commonwealth jurisdiction and does not specify any exclusions or exemptions, applying uniformly to all employers within its scope.
Key Provisions
The Superannuation (Productivity Benefit) (2000-2001 First Interest Factor Declaration) 2000 No. 167 is a statutory rule made under the authority of the Minister for Finance and Administration. It declares the first interest factor to be used in calculating interest on unpaid superannuation contributions for the financial year 2000-2001. Specifically, section 3E(1)(a) of the Superannuation (Productivity Benefit) Act 1988 mandates that the Minister must declare the first interest factor before each financial year, and section 3E(2) of the Act provides that this factor is determined by a specified formula that may include a variable based on the period of employment. For the year 2000-2001, the declared first interest factor is 0.0639, reflecting the 10-year Treasury Bond rate at April 2000. This rate is used in the formula specified in subsection 8A(2) of the Act to calculate the interest accruing on contributions that were not paid on time during the specified financial year.
Under the Superannuation (Productivity Benefit) Act 1988, designated employers are required to make periodic contributions to a superannuation fund on behalf of employees who do not have other employer-sponsored superannuation cover. These contributions must be based on the employee's salary and include an amount to cover any accrued entitlements under the Superannuation Benefit (Interim Arrangement) Act 1988. Employers must also pay interest on late contributions to account for the lost interest that would have been earned if the contributions had been made on time. The declared first interest factor is used to calculate this interest, ensuring it accrues in a manner similar to regular annual payments. Employers must adhere to these requirements by ensuring all contributions are made timely and calculating interest accurately based on the declared factor.
Breaching the obligations set out in the Superannuation (Productivity Benefit) Act 1988 can lead to significant consequences for employers. Failure to make the required contributions on time, or to calculate and pay the appropriate interest on late contributions, can result in financial penalties and legal action. The Act does not specify particular penalties or offences in the explanatory statement, but non-compliance could potentially lead to enforcement actions by the Australian Taxation Office or other relevant authorities. Employers found in breach may face fines, interest charges on the unpaid contributions, and additional administrative penalties. It is crucial for employers to understand and comply with these requirements to avoid legal repercussions and ensure their employees' superannuation entitlements are met.