explanatory statement
ISSUED BY THE MINISTER FOR FINANCE AND DEREGULATION
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
DECLARATION UNDER PARAGRAPH 3E(1)(a)
SUPERANNUATION (PRODUCTIVITY BENEFIT) (2009-2010 FIRST INTEREST FACTOR) DECLARATION 2009
The Superannuation (Productivity Benefit) Act 1988 (the PB Act) provides superannuation arrangements, based on the minimum employer superannuation requirements 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.
The Declaration, cited as the Superannuation (Productivity Benefit) (2009-2010 First Interest Factor) Declaration 2009, specifies the formula for the first interest factor to be used for the 2009-2010 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 2009-2010 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 2009 of 4.57 per cent.
The Declaration should be read in conjunction with the Superannuation (Productivity Benefit) (2009-2010 Second Interest Factor) Declaration 2009.
The Declaration is a legislative instrument for the purposes of the Legislative Instruments Act 2003 (LI Act).
No consultation was undertaken in relation to the 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 2009.
Overview
The Superannuation (Productivity Benefit) (2009-2010 First Interest Factor) Declaration 2009, issued under the Superannuation (Productivity Benefit) Act 1988, is a legislative instrument that specifies the first interest factor to be applied to unpaid employer superannuation contributions for the financial year 2009-2010. This declaration was enacted to ensure that employees who were covered by the Act prior to 30 June 2006 continue to receive their guaranteed superannuation contributions, including interest, in cases where employers fail to make the required payments to a superannuation fund. The Minister for Finance and Deregulation made this declaration based on a formula that reflects the periodic interest that would have been earned if the contributions had been paid into a fund, using the 10 year Treasury Bond rate of 4.57 per cent for April 2009. This legislative instrument is part of the machinery to implement the superannuation guarantees outlined in the Superannuation (Productivity Benefit) Act and was considered to be of a minor nature, thus consultation was deemed unnecessary.
Scope and Application
The Superannuation (Productivity Benefit) (2009-2010 First Interest Factor) Declaration 2009 pertains to the application of the Superannuation (Productivity Benefit) Act 1988, which governs the superannuation arrangements for certain Australian Government employees, office holders, and contractors. The Act applies to those who were covered by the superannuation arrangements on 30 June 2006, continuing to do so until the cessation of their relevant employment or their membership in an Australian Government superannuation scheme. The Act ensures that employer superannuation contributions are guaranteed to employees, with additional amounts payable by employers in the event of failure to join employees to a fund, calculated using interest factors for unpaid contributions. The Declaration specifies the formula for the first interest factor for the 2009-2010 financial year, determining the interest to be accrued on unpaid contributions based on the 10-year Treasury Bond rate. This instrument is a legislative measure under the Legislative Instruments Act 2003 and should be read alongside the Superannuation (Productivity Benefit) (2009-2010 Second Interest Factor) Declaration 2009, and it came into effect on 1 July 2009.
Key Provisions
The main operative sections of this legislation, the Superannuation (Productivity Benefit) (2009-2010 First Interest Factor) Declaration 2009, pertain to the declaration of the first interest factor for the financial year 2009-2010 under the Superannuation (Productivity Benefit) Act 1988 (PB Act). Section 3E(1)(a) of the PB Act mandates that the Minister must declare, before each financial year, the first interest factor to be used for that year, which is specified in this Declaration (paragraph 3E(1)(a)). This interest factor is calculated based on a formula that emulates the periodic interest that would have been earned during the year had the superannuation contributions been held in a fund (section 3E(1)(a)). The 2009-2010 financial year's first interest factor is determined using the 10-year Treasury Bond rate for April 2009, which is 4.57 per cent (section 8A). This Declaration should be read in conjunction with the Superannuation (Productivity Benefit) (2009-2010 Second Interest Factor) Declaration 2009.
The obligations and requirements imposed by this Act on the parties it governs include ensuring that employers who are obligated to contribute to the superannuation arrangements under the PB Act do so timely and accurately. Specifically, employers must join their employees to a fund to receive these contributions or be liable for extra amounts in case of non-compliance. In the event that an employer fails to make the required superannuation contributions, they are required to pay additional amounts calculated using the declared first interest factor for the financial year in question. This additional amount compensates for the interest that could have been earned if the contributions had been made on time and held in a fund. The Act also requires that the Minister declare the first interest factor before the start of each financial year, as specified in this Declaration.
The Superannuation (Productivity Benefit) Act 1988 does not explicitly outline specific offences, penalties, or consequences for breach in the provided explanatory statement. However, the obligations and requirements mentioned suggest that failure to comply with the Act, such as not making the required superannuation contributions or not joining employees to a fund, could result in financial penalties for employers. These penalties would be calculated using the first interest factor declared for the relevant financial year. While the exact penalties are not specified in the explanatory statement, they are likely to be detailed in the main Act or related regulations. Employers must ensure strict adherence to the requirements to avoid any potential financial repercussions.