Superannuation (Productivity Benefit) (2000-2001 Second Interest Factor) Declaration 2000 2000 No. 168
EXPLANATORY STATEMENT
STATUTORY RULES 2000 No. 168
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 Commonwealth 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 superannuation 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 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)(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 regular contributions under the PB Act to a superannuation fund 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 contributions which were due to be paid under the PB Act in financial years following 1 July 1990 up to the end of the financial year in which the payment is made.
This Declaration cited as the Superannuation (Productivity Benefit) (2000-2001 Second Interest Factor) Declaration 2000, specifies that the rate to be used in the formula for the 2000-2001 financial year is 0.0639, which is the 10 year Treasury Bond rate at April 2000 expressed as a decimal.
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 became entitled to a benefit under the PB Act.
The Declaration commenced on gazettal.
Overview
The Superannuation (Productivity Benefit) (2000-2001 Second Interest Factor) Declaration 2000, issued under section 3E(1)(b) of the Superannuation (Productivity Benefit) Act 1988, was enacted to address the need for a specific interest rate factor applicable for the financial year 2000-2001, in accordance with the legislative requirements of the PB Act. This Act was introduced by the Parliament of Australia, with the Minister for Finance and Administration issuing the Declaration to specify the second interest factor for the financial year. The policy objective is to ensure that employers accurately calculate and pay the required superannuation contributions and associated interest to eligible employees, facilitating their retirement savings and providing a reliable mechanism for those without other employer-sponsored superannuation cover. The declared rate of 0.0639, based on the 10-year Treasury Bond rate at April 2000, was intended to accurately reflect the prevailing economic conditions for determining the interest that should accrue on superannuation contributions and benefits.
Scope and Application
The Superannuation (Productivity Benefit) (2000-2001 Second Interest Factor) Declaration 2000 applies to employers and employees who are subject to the provisions of the Superannuation (Productivity Benefit) Act 1988. This Act is designed to provide a minimum level of superannuation contributions for certain employees, including Commonwealth employees and other eligible individuals who do not have employer-sponsored superannuation cover. The Declaration specifies the second interest factor for the financial year 2000-2001, which is used to calculate the interest accruing on contributions and entitlements under the Act. The geographic and jurisdictional reach of this legislation is national, as it pertains to the Commonwealth of Australia. The Declaration sets a threshold for the calculation of interest rates on superannuation contributions, ensuring that interest accrues on amounts owed under the Superannuation Benefit (Interim Arrangement) Act 1988, as well as on contributions and interest that should have been paid under the PB Act since 1 July 1990. The application of this Act is extended through subordinate instruments, which specify the interest factors to be used in calculating the interest on superannuation contributions and entitlements.
Key Provisions
The Superannuation (Productivity Benefit) (2000-2001 Second Interest Factor) Declaration 2000 specifies the second interest factor to be used under the Superannuation (Productivity Benefit) Act 1988 for the financial year 2000-2001. Section 3E(1)(b) of the Act mandates that the Minister for Finance and Administration must declare a specific second interest factor before each financial year. This factor is determined by a formula involving a rate specified in the declaration, which can also include variables that depend on the period of the person's employment (subsection 3E(2)). For the 2000-2001 financial year, the declared second interest factor is 0.0639, which is the 10-year Treasury Bond rate at April 2000 expressed as a decimal. This rate is used to calculate the interest that accrues daily on amounts that had accrued prior to the person becoming a member of a fund or being entitled to a benefit under the Act.
Under this Act, employers of eligible employees must make periodic contributions based on the employee's salary to the superannuation fund nominated by the Minister or another approved fund. These contributions are meant to cover amounts accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 up to 30 June 1990, as well as amounts that should have been paid as regular contributions under the PB Act from 1 July 1990 onwards but before the payment is made. Employers are also required to pay extra amounts as interest on contributions made to account for the loss of interest since contributions were due. This ensures that the superannuation benefits are maintained at the correct levels.
Breach of the requirements outlined in the Superannuation (Productivity Benefit) Act 1988 can lead to significant consequences. Employers who fail to make the required contributions or to calculate the interest accurately may face financial penalties and legal repercussions. The Act does not explicitly state the penalties for non-compliance, but breaches of superannuation laws generally attract substantial fines and potential imprisonment under related legislation such as the Superannuation Industry (Supervision) Act 1993. The penalties for non-compliance can be severe, reflecting the importance of the superannuation guarantee system in Australia.