Superannuation (Productivity Benefit) (2002-2003 First Interest Factor) Declaration 2002 2002 No. 133
EXPLANATORY STATEMENT
STATUTORY RULES 2002 No. 133
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) (2002-2003 FIRST INTEREST FACTOR) DECLARATION 2002
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 in respect of those employees 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) Act 1993. The contribution rates are set down in the PB Act or in instruments under the PB Act.
Employers are also required to pay to the same fund, on a once only basis, any entitlement accrued by the employee under the then Superannuation Benefit (Interim Arrangement) Act 1988 in respect of employment with that employer before 1 July 1990.
The contributions provided for under the PB Act are guaranteed to employees where an employer fails to join an employee to a scheme. The employer is required to pay extra amounts as interest on those contributions, 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.
This Declaration cited as the Superannuation (Productivity Benefit) (2002-2003 First Interest Factor) Declaration 2002 specifies that the rate to be used in the formula for the 2002-2003 year is 0.0610, which is the 10 year Treasury Bond rate at April 2002 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 2002 to 30 June 2003 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) (2002-2003 First Interest Factor) Declaration 2002, issued under the authority of the Minister for Finance and Administration, was enacted to comply with the requirements set forth in paragraph 3E(1)(a) of the Superannuation (Productivity Benefit) Act 1988. This Act was introduced to address the need for a specific interest factor to be applied to the calculation of productivity benefits for the financial year 2002-2003, ensuring that interest is accrued appropriately on superannuation contributions that were not made on time by employers to funds approved by the Minister. The Declaration specifies that the first interest factor for that year is 0.0610, derived from the 10-year Treasury Bond rate as of April 2002, and ensures that interest is calculated in a manner consistent with regular payments throughout the year. This legislative measure is intended to maintain the integrity of the superannuation contributions system by accurately reflecting the impact of delayed contributions.
Scope and Application
The Superannuation (Productivity Benefit) (2002-2003 First Interest Factor) Declaration 2002 applies under the Superannuation (Productivity Benefit) Act 1988, which provides for the payment of productivity benefits to eligible employees who lack other employer-sponsored superannuation cover. This includes Commonwealth sector employees and certain other employees. The Declaration, issued under the authority of the Minister for Finance and Administration, specifies the interest rate to be used for determining interest accruals on unpaid superannuation contributions for the 2002-2003 financial year. The declared interest rate of 0.0610 is derived from the 10-year Treasury Bond rate at April 2002, and the interest is calculated at half this rate on a daily basis for contributions that should have been paid during the specified period. The Declaration aims to ensure that interest is accrued in a manner similar to regular contributions, with adjustments made for payments made late in the financial year. The Declaration applies nationally, as it is made under Commonwealth legislation. There are no stated exclusions or exemptions in this Declaration, but the application of the interest factor is subject to the conditions and requirements of the Superannuation (Productivity Benefit) Act 1988.
Key Provisions
The Superannuation (Productivity Benefit) (2002-2003 First Interest Factor) Declaration 2002 (subsection 3E(1)(a)) sets out the interest factor for the financial year 2002-2003, as required by the Superannuation (Productivity Benefit) Act 1988 (the "PB Act"). This declaration specifies that the interest factor for the 2002-2003 financial year is 0.0610, which represents the 10-year Treasury Bond rate at April 2002 expressed as a decimal. This factor is used to determine the interest that accrues on superannuation contributions that should have been made but were not, on a daily basis during the financial year (subsection 3E(2)). This interest factor is applied in accordance with subsection 8A(2) of the PB Act.
The PB Act requires employers who are designated under the Act to make regular contributions to a superannuation fund on behalf of their employees who are not covered by other employer-sponsored superannuation arrangements. These contributions are to be made to a fund nominated or approved by the Minister for Finance and Administration, or another regulated superannuation fund as defined by the Superannuation Industry (Supervision) Act 1993. Employers are also required to pay any entitlements accrued by an employee under the then Superannuation Benefit (Interim Arrangement) Act 1988 for employment before 1 July 1990, to the same fund on a once-only basis. The Act guarantees that employees will receive these contributions even if an employer fails to join them to a scheme. Employers are also obligated to pay additional amounts as interest on these contributions to account for the loss of interest due to delayed payments.
Failure to comply with the requirements of the PB Act may result in a range of consequences. Employers who do not make the required contributions to a superannuation fund may be liable to pay additional amounts as interest on those contributions. Furthermore, if an employer fails to join an eligible employee to a scheme, the employee is guaranteed to receive the contributions from the Commonwealth. Non-compliance with these obligations could potentially lead to civil or criminal penalties, depending on the nature and severity of the breach. However, the specific penalties are not detailed within this declaration but would be found within the PB Act itself.
The Declaration is made under the authority of the Minister for Finance and Administration and comes into effect on the date of its gazettal. It is a crucial component in ensuring that the interest on unpaid superannuation contributions is calculated correctly for the 2002-2003 financial year, in accordance with the provisions of the PB Act. This ensures that employees receive the full benefit of the superannuation support to which they are entitled, including the appropriate interest accrual on any delayed contributions.