Superannuation (Productivity Benefit) (2003-2004 Second Interest Factor) Declaration 2003 2003 No. 176
EXPLANATORY STATEMENT
STATUTORY RULES 2003 No. 176
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
Superannuation (Productivity Benefit) (2003-2004 Second Interest Factor) Declaration 2003
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. More recently, where the employee is eligible, employers have been able to pay contributions 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 PB 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 interest that is to accrue on past accumulations (from preceding financial years) during all or part of a financial year including:
• 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 from 1 July 1990; 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) (2003-2004 Second Interest Factor) Declaration 2003, specifies the second interest factor to be used for the 2003-2004 financial year. The second interest factor has been updated to apply the 10 year Treasury Bond rate as at April 2003 of 5.28% expressed as a decimal.
The second interest factor provides for interest to accrue 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) (2003-2004 Second Interest Factor) Declaration 2003 was enacted by the Commonwealth of Australia to address the need for an updated calculation of the second interest factor for the 2003-2004 financial year under the Superannuation (Productivity Benefit) Act 1988. This Act was designed to ensure that Commonwealth employees and certain other employees, who lack employer-sponsored superannuation cover, receive their minimum superannuation contributions through a productivity benefit. The Declaration, issued by the Minister for Finance and Administration under the authority of section 3E(1)(b) of the PB Act, specifies the second interest factor for the given financial year, which is essential for determining the interest that accrues on past superannuation accumulations. The policy objective of the Declaration is to accurately reflect the economic conditions of the time, specifically using the 10-year Treasury Bond rate as at April 2003 of 5.28% expressed as a decimal. This ensures that interest is fairly calculated on each amount that had accrued prior to the date when the person became a member of a fund or became entitled to a benefit under the PB Act.
Scope and Application
The Superannuation (Productivity Benefit) (2003-2004 Second Interest Factor) Declaration 2003 applies to employers who are designated under the Superannuation (Productivity Benefit) Act 1988 and their eligible employees, specifically those Commonwealth employees and certain other employees who do not have other employer-sponsored superannuation cover. This legislation mandates these employers to make periodic contributions to a superannuation fund approved by the Minister for Finance and Administration, or to another regulated fund as defined by the Superannuation Industry (Supervision) Act 1993. The contribution rates are set by the PB Act or in subsidiary instruments under it. The second interest factor specified in this Declaration is used to determine the interest that accrues on past accumulations from preceding financial years, including amounts accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 and contributions which should have been paid under the PB Act but were not. The geographic reach of this Act is national, applying across all states and territories in Australia. The Declaration itself does not explicitly state any exclusions or exemptions, but the underlying Act applies only to specified employees and employers. The application of the Act may also be extended or restricted through subordinate instruments issued under the authority of the Minister.
Key Provisions
The Superannuation (Productivity Benefit) (2003-2004 Second Interest Factor) Declaration 2003 (sections 1 and 2) sets out the specific second interest factor for the financial year 2003-2004 as 0.0528, based on the 10-year Treasury Bond rate of 5.28% as at April 2003. This factor is to be used under the Superannuation (Productivity Benefit) Act 1988 (section 3E(1)(b)) to calculate the interest on past accumulations for employees who have been covered by productivity superannuation arrangements but were not yet members of a superannuation fund. This interest is applied to amounts accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 up until 30 June 1990, contributions that should have been paid under the Productivity Benefit Act from 1 July 1990, and interest on contributions that were due in financial years following 1 July 1990. These provisions ensure that employees who have not been enrolled in a superannuation scheme by their employer are still compensated for the superannuation contributions that should have been made on their behalf.
Under the Superannuation (Productivity Benefit) Act 1988, designated employers must ensure that they make the necessary contributions to a superannuation fund on behalf of their employees who are not covered by any other employer-sponsored superannuation arrangement. These contributions must be made periodically and are to be directed to a fund approved by the Minister for Finance and Administration. Employers are also required to pay any entitlements accrued by the employee under the Superannuation Benefit (Interim Arrangement) Act 1988, which pertains to employment before 1 July 1990. The Act mandates that employers compensate for any lost interest due to delayed contributions by paying additional amounts as interest, calculated using the specified second interest factor.
Failure to comply with the obligations outlined in the Superannuation (Productivity Benefit) Act 1988 can result in significant consequences for employers. The Act does not explicitly list penalties for non-compliance in the Declaration itself, but general provisions within the Act and related legislative instruments outline potential civil and criminal penalties. Employers may be liable for financial penalties, which can include compensation for the unpaid contributions and accrued interest. Additionally, if the non-compliance is deemed to be willful or repeated, there could be more severe consequences, including fines and, in some cases, criminal charges against the responsible individuals within the employer entity.
The Superannuation (Productivity Benefit) (2003-2004 Second Interest Factor) Declaration 2003 ensures that the second interest factor is accurately applied to calculate interest on past accumulations for the specified financial year. By setting the second interest factor at 0.0528, the Declaration provides a clear guideline for employers to follow in their calculations. This ensures that employees who were not enrolled in a superannuation fund are fairly compensated for the superannuation contributions that should have been made on their behalf. The precise application of this interest factor is crucial for maintaining the integrity of the superannuation system and ensuring that employees receive the benefits to which they are entitled.