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)(b)
SUPERANNUATION (PRODUCTIVITY BENEFIT) (2008-2009 SECOND 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)(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.
This Declaration, cited as the Superannuation (Productivity Benefit) (2008-2009 Second Interest Factor) Declaration 2008, specifies the formula for the second interest factor to be used for the 2008-2009 financial year. The formula is based on the 10 year Treasury Bond rate for April 2008 of 6.29 per cent.
The second interest factor is used in section 8A of the PB Act to accrue interest for 2008‑2009 on the amounts of unpaid employer contributions for previous financial years and the interest that has been applied to those amounts in previous years using either the first interest factor or the second interest factor for those years.
This declaration should be read in conjunction with the Superannuation (Productivity Benefit) (2008-2009 First 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 Second Interest Factor) Declaration 2008 was issued under the authority of the Minister for Superannuation and Corporate Law, acting for and on behalf of the Minister for Finance and Deregulation. This legislative instrument aims to address a specific aspect of the Superannuation (Productivity Benefit) Act 1988 by setting the second interest factor for the financial year 2008-2009. The Superannuation (Productivity Benefit) Act 1988 provides for superannuation arrangements for certain Australian Government employees, office holders, and contractors, ensuring that employer contributions are guaranteed even if an employer fails to join the employee to a fund. This declaration is necessary to calculate the interest payable on unpaid employer contributions and interest accrued in previous years, ensuring compliance with the Act's provisions. The declaration is based on the 10 year Treasury Bond rate for April 2008, which was 6.29 per cent.
Scope and Application
The Superannuation (Productivity Benefit) (2008-2009 Second Interest Factor) Declaration 2008 applies to Australian Government employees, office holders and contractors who were covered by the Superannuation (Productivity Benefit) Act 1988 as of 30 June 2006, and who remain under this Act until they cease their relevant employment or become a member of an Australian Government superannuation scheme. The Act ensures that employer superannuation contributions are guaranteed to employees in cases where the employer fails to direct these contributions to a fund, and it mandates the calculation of additional interest payable by the employer for such unpaid contributions. This Declaration specifies the formula for the second interest factor applicable for the 2008-2009 financial year, which is based on the 10-year Treasury Bond rate for April 2008. The Declaration is a legislative instrument under the Legislative Instruments Act 2003 and came into effect on 1 July 2008. It should be read in conjunction with the Superannuation (Productivity Benefit) (2008-2009 First Interest Factor) Declaration 2008.
Key Provisions
The Superannuation (Productivity Benefit) (2008-2009 Second Interest Factor) Declaration 2008, made under the Superannuation (Productivity Benefit) Act 1988 (PB Act), specifies the formula for the second interest factor to be used for the 2008-2009 financial year. This Declaration, as referenced in paragraph 3E(1)(b) of the PB Act, is a legislative instrument under the Legislative Instruments Act 2003 (LI Act) and is designed to ensure that certain Australian Government employees, office holders, and contractors receive superannuation contributions from their employers. The Declaration outlines the second interest factor calculation, which is based on the 10 year Treasury Bond rate for April 2008, set at 6.29 per cent. This factor is crucial for accruing interest on unpaid employer contributions for previous financial years, as stipulated in section 8A of the PB Act.
Under the PB Act, employers are obligated to make superannuation contributions for employees who were covered by the Act on 30 June 2006, even if they were not new employees after that date. These contributions are guaranteed to the employees, and if an employer fails to make the contributions, they must pay extra amounts in respect of the interest that would have been earned had the contributions been paid to a fund. The second interest factor is applied to these unpaid contributions to calculate the interest payable for the 2008-2009 financial year. The Minister for Superannuation and Corporate Law is required to declare this factor before each financial year, ensuring transparency and consistency in the calculation process.
The PB Act imposes specific obligations on employers, particularly those who are required to contribute to superannuation arrangements for certain Australian Government employees. Employers must ensure they make the required superannuation contributions on time and in full. If an employer fails to join an employee to a fund to receive those contributions, they must pay extra amounts to the employee in respect of interest. This is calculated using the declared first and second interest factors for the relevant financial years. Employers must adhere to these requirements to comply with the PB Act and avoid any penalties or legal repercussions.
Failure to comply with the obligations set out in the PB Act can result in significant consequences for employers. The Act provides for both civil and criminal penalties for non-compliance. Employers who fail to make the required superannuation contributions or who do not pay the extra amounts in respect of interest can be subject to fines. The maximum penalties for such breaches can be substantial, reflecting the seriousness of the obligations under the Act. It is therefore crucial for employers to understand and adhere to their obligations to avoid facing these penalties.