Superannuation (Productivity Benefit) (2001-2002 First Interest Factor Declaration) 2001 2001 No. 167
EXPLANATORY STATEMENT
STATUTORY RULES 2001 No. 167
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE AND ADMINISTRATION
DECLARATION UNDER PARAGRAPH 3E(1)(A)
SUPERANNUATION (PRODUCTIVITY BENEFIT) (2001–2002 FIRST INTEREST FACTOR) DECLARATION 2001
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 periodic contributions based on the salary of the employee to a superannuation fund nominated or approved by the Minister for Finance and Administration. Where the employee is eligible contributions may be paid to another 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 arising because contributions have not been paid to a fund on behalf of the employee.
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) (2001-2002 First Interest Factor Declaration) 2001 specifies that the rate to be used in the formula for the 2001-2002 year is 0.0578, which is the 10 year Treasury Bond rate at April 2001 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 2001 to 30 June 2002 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 commences on gazettal.
Overview
The Superannuation (Productivity Benefit) (2001-2002 First Interest Factor Declaration) 2001 was enacted by the authority of the Minister for Finance and Administration to address the need for calculating the interest factor used in determining the productivity benefit for superannuation contributions that were not paid on time. This statutory rule was issued under the Superannuation (Productivity Benefit) Act 1988, which provides a mechanism for ensuring that employees without employer-sponsored superannuation cover still receive minimum superannuation support. The policy objective of the declaration is to establish a formula-based interest rate for the specified financial year, ensuring that interest accrues appropriately on late contributions in a manner similar to regular payments, thereby maintaining the integrity of the superannuation system. The declaration specifies the interest rate for the 2001-2002 financial year as 0.0578, derived from the 10-year Treasury Bond rate at April 2001.
Scope and Application
The Superannuation (Productivity Benefit) (2001–2002 First Interest Factor) Declaration 2001 applies to the calculation of interest on superannuation contributions for the financial year 2001-2002, under the Superannuation (Productivity Benefit) Act 1988. This Act primarily targets employers within the Commonwealth sector and certain other employees who are not covered by employer-sponsored superannuation schemes. The declared interest factor, set at 0.0578, is derived from the 10 year Treasury Bond rate as of April 2001. This rate is used to determine the amount of interest that accrues on late contributions to a superannuation fund, with the interest calculated on a daily basis and applied at half the declared rate. The application of this interest factor is essential for ensuring that superannuation contributions that are not made on time still accrue interest in a manner that reflects regular contributions made throughout the year. The declaration extends its application nationally, and while it does not explicitly exclude any entities or types of conduct, it is inherently tied to the specific conditions outlined in the Superannuation (Productivity Benefit) Act 1988.
Key Provisions
The key operative sections of the Superannuation (Productivity Benefit) (2001-2002 First Interest Factor Declaration) 2001 specify the interest factor for calculating interest on late superannuation contributions. 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. This declaration sets out the rate used in the formula to calculate the interest on contributions that should have been made but were not paid on time. For the 2001-2002 financial year, the declared rate was 0.0578, which is based on the 10 year Treasury Bond rate at April 2001 expressed as a decimal (section 3E(2)). The interest is calculated at half this rate, recognizing that full interest would only apply if contributions were made for the entire year.
The obligations under this legislation primarily concern designated employers, who must ensure they pay periodic contributions to a superannuation fund for eligible employees. These contributions should be made on a regular basis to ensure that employees receive their full entitlement. Employers are also required to pay an amount in respect of contributions which would have been made if the employee had joined a fund on 1 July 1990, and they must account for any interest accrued due to late payments. The interest is calculated using the formula specified in the declaration, which ensures that interest accrues in a manner similar to regular contributions throughout the year.
Breach of the obligations outlined in the Superannuation (Productivity Benefit) Act 1988 can result in civil and criminal consequences. Employers who fail to make the required contributions or do not account for late payments correctly may face financial penalties. The maximum penalties for non-compliance can be significant, depending on the severity and intent of the breach. Criminal penalties may also apply for deliberate or reckless non-compliance, with potential fines and imprisonment. The declaration itself serves to ensure that the interest calculations are transparent and consistent, providing a clear framework for employers to follow.