Superannuation (Productivity Benefit) (2001-2002 Second Interest Factor) Declaration 2001 2001 No. 168
EXPLANATORY STATEMENT
STATUTORY RULES 2001 No. 168
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE AND ADMINISTRATION
DECLARATION UNDER SECTION 3E(1)(b)
SUPERANNUATION (PRODUCTIVITY BENEFIT) (2001–2002 SECOND INTEREST FACTOR) DECLARATION 2001
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 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)(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) (2001-2002 Second Interest Factor) Declaration 2001, specifies that the rate to be used in the formula for the
2001-2002 financial year is 0.0578, which is the 10 year Treasury Bond rate at April 2001 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 commences on gazettal.
Overview
The Superannuation (Productivity Benefit) (2001–2002 Second Interest Factor) Declaration 2001, issued under the authority of the Minister for Finance and Administration, is a statutory rule aimed at clarifying the calculation of the second interest factor for the 2001–2002 financial year as required by the Superannuation (Productivity Benefit) Act 1988. This legislation was enacted to ensure that Commonwealth employees and certain other employees without other employer-sponsored superannuation cover receive the Superannuation Guarantee minimum contribution. The declaration specifies the rate to be used in the formula, which is 0.0578, representing the 10 year Treasury Bond rate at April 2001 expressed as a decimal. The policy objective is to ensure accurate and consistent calculation of interest accruing on amounts related to the productivity benefit, thereby maintaining the integrity and fairness of superannuation contributions for eligible employees.
Scope and Application
The Superannuation (Productivity Benefit) (2001-2002 Second Interest Factor) Declaration 2001 applies to employers who are designated under the Superannuation (Productivity Benefit) Act 1988, specifically those who are required to make contributions towards the superannuation funds of employees who lack other employer-sponsored superannuation cover. This includes Commonwealth employees and certain other eligible employees. The Act's provisions extend to ensuring that these employers make periodic contributions to the superannuation fund nominated by the Minister for Finance and Administration or another approved regulated fund, and that they pay interest on any delayed contributions. The geographic reach of this legislation is effectively national as it pertains to Commonwealth employees, but it also applies to other eligible employees across various industries. The Declaration specifies the second interest factor for the 2001-2002 financial year, which is determined by a formula involving the 10-year Treasury Bond rate at April 2001, expressed as a decimal. This Declaration operates nationally and will apply from the date of its gazette.
Key Provisions
The Superannuation (Productivity Benefit) (2001–2002 Second Interest Factor) Declaration 2001 sets out the interest factor for the 2001–2002 financial year, which is specified under Section 3E(1)(b) of the Superannuation (Productivity Benefit) Act 1988 (PB Act). This factor, which is 0.0578, is derived from the 10-year Treasury Bond rate as at April 2001, expressed as a decimal. This factor is crucial for determining the amount of interest that accrues on certain superannuation contributions and benefits. The interest factor is applied to the amounts accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 up until 30 June 1990, to the amounts that should have been paid as regular contributions under the PB Act since 1 July 1990, and to the interest that would have accumulated on these contributions.
Employers of employees covered by the PB Act are obligated to make periodic contributions to a superannuation fund nominated by the Minister for Finance and Administration. These contributions must reflect the employee's salary and are intended to provide the Superannuation Guarantee (SG) minimum superannuation contribution where no other employer-sponsored superannuation cover exists. Employers must also remit any accrued entitlements from the Superannuation Benefit (Interim Arrangement) Act 1988, along with interest calculated using the declared factor. Employers are also required to account for contributions that would have been made had the employee been employed and joined a fund on 1 July 1990, with interest accruing on these amounts as specified.
Breaching the obligations outlined in the PB Act can result in various consequences. Employers failing to make the required contributions or to remit interest calculated using the declared factor could face civil or administrative penalties. These penalties can include fines and other sanctions intended to ensure compliance with the Act. The specific penalties are not detailed in the Declaration but are governed by the broader provisions of the PB Act and related legislation, which can impose significant financial penalties for non-compliance.
The Declaration itself, once gazetted, becomes effective immediately, and the specified interest factor applies from the start of the 2001–2002 financial year. This ensures that all calculations regarding interest accruals on superannuation contributions and benefits are in line with the requirements set out by the PB Act. Employers and superannuation fund administrators must ensure their practices comply with this Declaration to avoid any potential legal or financial repercussions.