explanatory statement
ISSUED BY THE MINISTER FOR SUPERANNUATION AND CORPORATE LAW ACTING FOR AND ON BEHALF OF THE MINISTER FOR FINANCE AND DEREGULATION
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
DECLARATION UNDER PARAGRAPH 3E(1)(a)
SUPERANNUATION (PRODUCTIVITY BENEFIT) (2008-2009 FIRST INTEREST FACTOR) DECLARATION 2008
The Superannuation (Productivity Benefit) Act 1988 (the PB Act) provides superannuation arrangements, based on the minimum employer superannuation requirements envisaged in the Superannuation Guarantee (Administration) Act 1992, for certain Australian Government employees, office holders and contractors (employees).
The superannuation arrangements under the PB Act were closed to new employees from 1 July 2006. However, they continue to apply to persons who were covered by the Act on 30 June 2006 until they cease relevant employment or become a member of an Australian Government superannuation scheme.
The employer superannuation contributions provided for under the PB Act are guaranteed to employees where an employer fails to join the employee to a fund to receive those contributions. In such cases, extra amounts are payable by the employer in respect of interest that may have been earned had those contributions been paid to a fund. These additional amounts are calculated by applying the first interest factor for a financial year to the contributions that were due to be paid, but were not paid, in that year and the second interest factor in respect of any later years.
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.
This Declaration, cited as the Superannuation (Productivity Benefit) (2008-2009 First Interest Factor) Declaration 2008, specifies the formula for the first interest factor to be used for the 2008-2009 financial year. The formula emulates the periodic interest that would have been earned during the year had the contributions been held in a fund.
The first interest factor is used in section 8A of the PB Act to accrue interest on unpaid employer contributions for the 2008-09 financial year, as if they had been paid into a fund in regular payments throughout the year, based on the 10 year Treasury Bond rate for April 2008 of 6.29 per cent.
This Declaration should be read in conjunction with the Superannuation (Productivity Benefit) (2008-2009 Second Interest Factor) Declaration 2008.
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 1 July 2008.
Overview
The Superannuation (Productivity Benefit) (2008-2009 First Interest Factor) Declaration 2008 was issued under the authority of the Superannuation (Productivity Benefit) Act 1988 and is a legislative instrument under the Legislative Instruments Act 2003. It was introduced to specify the first interest factor for the 2008-2009 financial year, ensuring that superannuation arrangements for certain Australian Government employees, office holders, and contractors are accurately calculated. The Act addresses the need to provide superannuation benefits to eligible employees and guarantees employer contributions where employers fail to join employees to a fund. This declaration ensures that the interest factor is set in accordance with the stipulated formula, reflecting the periodic interest that would have been earned if contributions had been paid into a fund. The policy objective is to maintain the integrity of the superannuation arrangements by ensuring accurate interest accruals for unpaid employer contributions.
The Declaration was enacted without consultation as it is considered a minor or machinery instrument under the Legislative Instruments Act 2003. It commenced on 1 July 2008 and should be read in conjunction with the Superannuation (Productivity Benefit) (2008-2009 Second Interest Factor) Declaration 2008. This Declaration is instrumental in providing clarity and consistency in the calculation of superannuation benefits for eligible employees under the Superannuation (Productivity Benefit) Act 1988.
Scope and Application
The Superannuation (Productivity Benefit) (2008-2009 First Interest Factor) Declaration 2008 applies to Australian Government employees, office holders, and contractors who were already covered by the Superannuation (Productivity Benefit) Act 1988 (the PB Act) as of 30 June 2006. It establishes the first interest factor for the 2008-2009 financial year, which is used to calculate the interest on unpaid employer superannuation contributions. The Act ensures that employees receive guaranteed employer superannuation contributions if employers fail to make these payments to a fund, with additional interest calculated based on the specified first interest factor. The legislation is of a minor nature and does not require consultation as per the Legislative Instruments Act 2003. It operates within the Commonwealth jurisdiction and is effective from 1 July 2008.
Key Provisions
The Superannuation (Productivity Benefit) (2008-2009 First Interest Factor) Declaration 2008, issued under the Superannuation (Productivity Benefit) Act 1988, outlines the formula for determining the first interest factor applicable for the 2008-2009 financial year. This factor is essential for calculating the interest that would have been earned on unpaid employer superannuation contributions as if they had been invested in a fund (Section 3E(1)(a)). The formula is designed to emulate the periodic interest rate that would have been accrued based on the 10-year Treasury Bond rate for April 2008, which was set at 6.29%. This interest factor is applied under section 8A of the PB Act to ensure that employees receive the benefit of interest on any superannuation contributions that were not paid by their employers.
The Act imposes certain obligations on employers who are subject to the superannuation arrangements under the PB Act. These employers are required to make the necessary superannuation contributions to their employees' accounts. In cases where an employer fails to join an employee to a fund to receive these contributions, they must make up for the shortfall by paying extra amounts that include interest calculated using the specified first interest factor. This ensures that employees are not disadvantaged due to any failure by the employer to make timely contributions. Furthermore, the Act guarantees that these contributions will be compensated with interest if they are not made on time.
Breaches of the obligations under the PB Act can lead to various consequences. Employers who fail to make the required superannuation contributions or who do not join their employees to a fund may be liable to pay additional amounts calculated using the first interest factor. These additional payments are designed to compensate for the interest that would have been earned if the contributions had been made on time. While the Declaration itself does not explicitly state penalties for non-compliance, under the broader legislative framework of the Superannuation Guarantee (Administration) Act 1992, non-compliance can lead to significant civil and criminal penalties, including fines and imprisonment, depending on the severity and intent of the breach.