Superannuation (Productivity Benefit) (2004-2005 Second Interest Factor) Declaration 2004 2004 No. 200
EXPLANATORY STATEMENT
STATUTORY RULES 2004 No. 200
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE AND ADMINISTRATION
DECLARATION UNDER PARAGRAPH 3E(1)(b)
SUPERANNUATION (PRODUCTIVITY BENEFIT) (2004-2005 SECOND INTEREST FACTOR) DECLARATION 2004
SECOND INTEREST FACTOR
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 fund. 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) (2004-2005 Second Interest Factor) Declaration 2004, specifies the second interest factor to be used for the 2004-2005 financial year. The second interest factor has been updated to apply the 10 year Treasury Bond rate as at April 2004, as provided by the Reserve Bank of Australia, of 5.94% 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) (2004-2005 Second Interest Factor) Declaration 2004, enacted in 2004, serves to specify the second interest factor under the Superannuation (Productivity Benefit) Act 1988. This legislation was introduced to address the need for a precise interest factor for the financial year 2004-2005, in line with the requirements of the Superannuation (Productivity Benefit) Act 1988. This Act, enacted by the Parliament of Australia, aims to ensure that employees, particularly those without employer-sponsored superannuation cover, receive their minimum superannuation contributions as mandated by law. The policy objective is to provide a clear and consistent method for calculating interest on past superannuation contributions and benefits, thereby maintaining the integrity and value of the superannuation entitlements accrued by eligible employees. The Minister for Finance and Administration issued this statutory rule to facilitate accurate interest accruals in accordance with the specified formula under the Act.
Scope and Application
The Superannuation (Productivity Benefit) (2004-2005 Second Interest Factor) Declaration 2004 applies to the second interest factor stipulated under the Superannuation (Productivity Benefit) Act 1988 for the financial year 2004-2005. This legislation primarily concerns employers who are required to make contributions to a superannuation fund on behalf of Commonwealth employees and certain other employees who lack employer-sponsored superannuation cover. The Act specifies the interest factor to be used in calculating the interest accruing on past accumulations from preceding financial years, including amounts accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 up to 30 June 1990 and contributions due under the Superannuation (Productivity Benefit) Act 1988 from 1 July 1990. The second interest factor declared is based on the 10 year Treasury Bond rate as at April 2004, which is 5.94% expressed as a decimal. The geographic and jurisdictional reach of this Act is Commonwealth-wide, applying to all designated employers within Australia. The Act does not explicitly state exclusions, exemptions, or thresholds, but the applicability is inherently limited to the specified financial year and the prescribed interest calculation. Subordinate instruments may further extend or restrict the application of this Act.
Key Provisions
The main operative sections of this Declaration (Superannuation (Productivity Benefit) (2004-2005 Second Interest Factor) Declaration 2004) are pivotal in determining the interest factor applied to superannuation contributions for the financial year 2004-2005. Section 1 of the Declaration formally cites the title and commencement date of the Declaration, while section 2 specifies the second interest factor for the 2004-2005 financial year, which is 5.94% expressed as a decimal. This factor is calculated using the 10-year Treasury Bond rate as at April 2004, as provided by the Reserve Bank of Australia. This second interest factor is critical as it influences the interest that accrues on past superannuation accumulations and contributions, ensuring that employees receive appropriate compensation for any delays in superannuation payments.
The obligations imposed by this Act on the relevant parties, primarily employers and the Minister for Finance and Administration, include the requirement for employers to make periodic contributions to a superannuation fund for employees not covered by other employer-sponsored superannuation schemes. These contributions must be made to a fund approved by the Minister. Additionally, employers must also pay any entitlements accrued by the employee under the Superannuation Benefit (Interim Arrangement) Act 1988, if applicable. The Minister, on the other hand, is obligated to declare the second interest factor before the start of each financial year, ensuring that the appropriate interest rates are applied to past superannuation accumulations and contributions.
Breach of the obligations set forth in the Superannuation (Productivity Benefit) Act 1988 can lead to several consequences. Employers who fail to make the required contributions or do not adhere to the approved superannuation funds may face penalties, including fines or other legal repercussions. The exact penalties are not detailed in this Declaration but can be found in the primary legislation. Employers must ensure compliance to avoid any legal or financial liabilities. Furthermore, the accuracy and timeliness of the Minister's declaration of the second interest factor are crucial, as incorrect declarations can result in employees not receiving the appropriate interest on their superannuation contributions, potentially leading to disputes or further legal actions.