EXPLANATORY STATEMENT
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE AND ADMINISTRATION
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
DECLARATION UNDER SECTION 3D
SUPERANNUATION (PRODUCTIVITY BENEFIT) (2007-2008 CONTINUING CONTRIBUTIONS) DECLARATION 2007
VARIATION OF TABLE
The Superannuation (Productivity Benefit) Act 1988 (the PB Act) provides the mechanism by which the Superannuation Guarantee (SG) minimum employer superannuation contribution is made for Australian Government employees and certain other persons (employees) who have no other employer-sponsored superannuation cover. Prior to 1 July 1992, the PB Act provided productivity superannuation to these employees.
The PB Act was amended by the Superannuation (Consequential Amendments) Act 2005 to close the superannuation arrangements under the PB Act to new employees from 1 July 2006. However, the PB Act will continue to apply to employees covered by the Act as at 30 June 2006 until they no longer meet the qualifications for PB Act coverage (i.e. because they cease relevant employment or, if eligible, become members of an Australian Government
superannuation scheme). The annual revision of instruments setting amounts payable by employers on behalf of employees will therefore need to continue until those employees no longer meet the qualifications for PB Act coverage.
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 amount to be contributed by an employer is determined from the table in the Schedule to the PB Act. The table is structured so that a proportionately greater benefit is provided to lower paid wage earners. The amount to be contributed is adjusted where the employee is not employed full-time.
This Declaration, made under section 3D of the PB Act and cited as the Superannuation (Productivity Benefit) (2007-2008 Continuing Contributions) Declaration 2007 substitutes a new table in the Schedule to the PB Act in relation to the financial year commencing on 1 July 2007.
The major effect of the substituted table is to increase the salary threshold from $2,710.77 to $2,805.38 per week above which the superannuation contribution payable is a flat dollar amount, equal to 9 per cent of the threshold amount. The substituted table will mean that employees on salaries in excess of $2,805.38 per week ($145,880 per annum) will receive a flat contribution equivalent to 9 per cent of that threshold amount or $252.48 per week.
The substituted table also sets superannuation contributions for employees on salaries between $150.33 per week and $2,805.38 per week at 9 per cent of the employee’s salary.
The substituted table continues to provide for a flat rate superannuation contribution of $13.53 per week for lower paid wage earners whose weekly rate of salary is less than $150.33, and for whom 9 per cent of weekly salary would be equal to or less than this amount.
The substituted table continues the historical arrangements whereby contribution rates under the PB Act have been skewed so that low-income earners receive more than the SG percentage rate of 9 per cent and higher income earners receive less in line with the threshold limit of the SG.
The Declaration is a legislative instrument for the purposes of the Legislative Instruments Act 2003 (LI Act).
No consultation was undertaken in relation to this Declaration. In accordance with paragraph 18(2)(a) of the LI Act, consultation was considered to be unnecessary because the instrument is of a minor or machinery nature.
The Declaration commences on the day after it is registered on the Federal Register of Legislative Instruments.
Overview
The Superannuation (Productivity Benefit) (2007-2008 Continuing Contributions) Declaration 2007 is an instrument made under the authority of the Minister for Finance and Administration to amend the Superannuation (Productivity Benefit) Act 1988. This Act was enacted to ensure that Australian Government employees and other individuals without employer-sponsored superannuation coverage receive a minimum level of superannuation contributions, known as the Superannuation Guarantee (SG), through the Productivity Benefit (PB) arrangements. The Act was initially designed to provide productivity superannuation to employees, but was later amended to close the arrangements to new employees as of 1 July 2006, while continuing to apply to existing employees until they no longer met the qualifications for PB Act coverage. The 2007 Declaration updates the table in the Schedule to the PB Act, adjusting the salary threshold above which a flat dollar amount superannuation contribution is payable and modifying the contribution rates for employees earning between specific salary brackets, ensuring the scheme remains aligned with the SG percentage rate of 9 per cent and maintains its focus on supporting lower income earners.
Scope and Application
The Superannuation (Productivity Benefit) (2007-2008 Continuing Contributions) Declaration 2007 applies to Australian Government employees and certain other individuals who are not covered by other employer-sponsored superannuation arrangements and were already covered under the Superannuation (Productivity Benefit) Act 1988 as of 30 June 2006. This legislation governs the mechanism by which the Superannuation Guarantee minimum employer superannuation contributions are made for these specified employees. Employers of these employees are required to make periodic contributions to a superannuation fund, either nominated or approved by the Minister for Finance and Administration or, where eligible, to another regulated superannuation fund as defined by the Superannuation Industry (Supervision) Act 1993. The amount of these contributions is determined by a table in the Schedule to the PB Act, which has been updated by this Declaration to reflect changes for the financial year commencing 1 July 2007. The Declaration adjusts the salary threshold above which the superannuation contribution payable is a flat dollar amount equivalent to 9 per cent of the threshold amount. The Declaration is a legislative instrument under the Legislative Instruments Act 2003 and commences on the day after it is registered on the Federal Register of Legislative Instruments.
Key Provisions
The Superannuation (Productivity Benefit) (2007-2008 Continuing Contributions) Declaration 2007, made under section 3D of the Superannuation (Productivity Benefit) Act 1988, establishes new rates for superannuation contributions for certain employees for the financial year starting on 1 July 2007. This declaration revises the table in the Schedule of the PB Act, affecting how employers must calculate and pay superannuation contributions to eligible employees. Specifically, the new table increases the salary threshold above which a flat dollar amount of 9 per cent is payable from $2,710.77 to $2,805.38 per week. For employees earning above this threshold, employers must contribute a flat amount equivalent to 9 per cent of $2,805.38, which translates to $252.48 per week. For employees earning between $150.33 and $2,805.38 per week, the contribution rate remains 9 per cent of their weekly salary. Lower-paid employees, earning less than $150.33 per week, will continue to receive a flat contribution of $13.53 per week, a rate higher than the standard 9 per cent of their salary.
Employers under the PB Act have specific obligations regarding these contributions. They must ensure periodic payments to a superannuation fund approved or nominated by the Minister for Finance and Administration or to another regulated fund as defined under the Superannuation Industry (Supervision) Act 1993. Employers are required to adjust the contributions according to the new table, particularly focusing on the increased salary threshold and the corresponding flat contribution for higher earners. The contributions must be proportionately adjusted for part-time employees, ensuring that the benefits align with their actual working hours.
Breach of these obligations can lead to significant consequences for employers. The Superannuation (Productivity Benefit) Act 1988 imposes penalties for non-compliance with the requirements set out in the Act. Employers failing to make the correct superannuation contributions can be subject to civil penalty provisions. The maximum penalties for such breaches can include fines up to $21,000 per contravention, which underscores the importance of adherence to the legislative requirements. Additionally, failure to comply may also lead to administrative actions and legal proceedings, further emphasising the necessity for employers to meticulously follow the stipulated contribution rates and processes.