Superannuation (Productivity Benefit) (2002-2003 Second Interest Factor) Declaration 2002 2002 No. 134
EXPLANATORY STATEMENT
STATUTORY RULES 2002 No. 134
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) (2002-2003 SECOND INTEREST FACTOR) DECLARATION 2002
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 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)(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;
• contributions which should have been paid (but were not) 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) (2002-2003 Second Interest Factor) Declaration 2002, specifies that the rate to be used in the formula for the 2002-2003 financial year is 0.0610, which is the 10 year Treasury Bond rate at April 2002 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) (2002-2003 Second Interest Factor) Declaration 2002 was introduced to address the need for setting the second interest factor for the financial year 2002-2003 under the Superannuation (Productivity Benefit) Act 1988. This Act was enacted to provide a mechanism by which the Superannuation Guarantee minimum superannuation contribution is made available to Commonwealth employees and certain other employees without other employer-sponsored superannuation cover. The Declaration, issued by the authority of the Minister for Finance and Administration, specifies the rate to be used in the formula for calculating the second interest factor, which is essential for determining the interest that accrues on amounts that should have been paid as superannuation contributions. This statutory rule was made under the authority of the Superannuation (Productivity Benefit) Act 1988 and aims to ensure that employees receive the correct interest accruals on superannuation contributions in cases where employers have failed to make the required payments.
Scope and Application
The Superannuation (Productivity Benefit) (2002-2003 Second Interest Factor) Declaration 2002 applies to Commonwealth employees and certain other employees who are covered under the Superannuation (Productivity Benefit) Act 1988 and have no other employer-sponsored superannuation cover. This legislation mandates that designated employers must make periodic contributions to a superannuation fund on behalf of eligible employees, including those who were previously covered under the Superannuation Benefit (Interim Arrangement) Act 1988. The declared second interest factor for the 2002-2003 financial year is 0.0610, which is derived from the 10 year Treasury Bond rate at April 2002. This factor is used to calculate the interest that accrues daily on amounts that had been accrued prior to an employee's membership in a fund or entitlement to benefits under the Act. The Declaration operates within the Commonwealth jurisdiction and comes into effect upon gazettal, ensuring that interest is calculated accurately and fairly for the specified financial year.
Key Provisions
The Superannuation (Productivity Benefit) (2002-2003 Second Interest Factor) Declaration 2002, issued under section 3E(1)(b) of the Superannuation (Productivity Benefit) Act 1988, specifies the second interest factor for the 2002-2003 financial year as 0.0610. This factor is based on the 10-year Treasury Bond rate at April 2002 expressed as a decimal, and it applies to the calculation of interest accruing on certain superannuation amounts. Specifically, it is used to determine the interest that accrues on amounts accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 up to 30 June 1990, contributions that should have been paid under the Superannuation (Productivity Benefit) Act but were not, and amounts that would have accumulated as interest on these contributions.
The Declaration imposes specific obligations on employers who are designated under the Superannuation (Productivity Benefit) Act. These employers are required to make periodic contributions to a superannuation fund for eligible employees who do not have other employer-sponsored superannuation cover. The contribution rates are stipulated in the Act or in instruments made under it. Employers must also ensure that any entitlements accrued by employees under the Superannuation Benefit (Interim Arrangement) Act 1988 in respect of employment before 1 July 1990 are paid to the same fund on a once-only basis. Additionally, the employer must pay interest on the contributions to account for the loss of interest due to the delay in payment. This interest is calculated using the declared second interest factor.
Failure to comply with the requirements of the Superannuation (Productivity Benefit) Act can result in significant consequences. Employers who do not make the required contributions to the specified superannuation fund may face civil or criminal penalties. The precise penalties are not specified in the Declaration but are generally outlined in the primary Act. Employers may be required to pay back the unpaid contributions along with the accrued interest, and they may also face fines or other legal actions. The Act ensures that employees' superannuation entitlements are protected, even in cases where employers fail to make the required payments.