explanatory statement
ISSUED BY THE MINISTER FOR FINANCE AND DEREGULATION
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
DECLARATION UNDER PARAGRAPH 3E(1)(a)
SUPERANNUATION (PRODUCTIVITY BENEFIT) (2011-2012 FIRST INTEREST FACTOR) DECLARATION 2011
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) (2011-2012 First Interest Factor) Declaration 2011, specifies the formula for the first interest factor to be used for the 2011-2012 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 2011-2012 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 2011 of 5.40 per cent.
The Declaration should be read in conjunction with the Superannuation (Productivity Benefit) (2011-2012 Second Interest Factor) Declaration 2011.
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 2011.
Overview
The Superannuation (Productivity Benefit) (2011-2012 First Interest Factor) Declaration 2011 is a legislative instrument issued under the Superannuation (Productivity Benefit) Act 1988. It specifies the formula for the first interest factor to be applied in calculating the interest on unpaid employer superannuation contributions for the 2011-2012 financial year. This instrument aims to ensure that the interest factor aligns with the periodic interest that would have been earned if the contributions had been held in a fund. The declaration is based on the 10-year Treasury Bond rate for April 2011, which was 5.40 per cent. The Minister for Finance and Deregulation issued this declaration to fulfil the requirement under paragraph 3E(1)(a) of the PB Act to specify the first interest factor before the start of each financial year. The declaration is intended to be read in conjunction with the Superannuation (Productivity Benefit) (2011-2012 Second Interest Factor) Declaration 2011.
Scope and Application
The Superannuation (Productivity Benefit) (2011-2012 First Interest Factor) Declaration 2011 applies to the calculation of interest on unpaid employer superannuation contributions for certain Australian Government employees, office holders, and contractors covered by the Superannuation (Productivity Benefit) Act 1988, provided they were already covered by the Act as of 30 June 2006. This legislative instrument specifies the first interest factor for the 2011-2012 financial year, which is applied to calculate the interest on unpaid contributions as if they had been invested in a fund. The interest factor is determined using a formula based on the 10-year Treasury Bond rate for April 2011, which was 5.40 per cent. The Declaration is a minor legislative instrument under the Legislative Instruments Act 2003 and commenced on 1 July 2011. It is used in conjunction with the Superannuation (Productivity Benefit) (2011-2012 Second Interest Factor) Declaration 2011.
Key Provisions
The Superannuation (Productivity Benefit) (2011-2012 First Interest Factor) Declaration 2011 specifies the formula to be used for calculating the first interest factor under section 8A of the Superannuation (Productivity Benefit) Act 1988 (the PB Act). The Declaration, issued under paragraph 3E(1)(a) of the PB Act, mandates the Minister to declare the first interest factor before each financial year, which is to be used in determining interest on unpaid employer contributions. For the financial year 2011-2012, the declared first interest factor is calculated based on the 10-year Treasury Bond rate for April 2011, which is 5.40%. This interest factor is to be applied to the unpaid contributions as if they had been invested in a fund and earning interest over the year. The formula emulates the periodic interest that would have been earned during the year if the contributions had been paid into a fund. This Declaration is a legislative instrument under the Legislative Instruments Act 2003 and comes into effect on 1 July 2011.
Under the PB Act, employers are obligated to make superannuation contributions for certain Australian Government employees, office holders, and contractors. If an employer fails to join an employee to a fund to receive these contributions, the employer is required to guarantee these contributions to the employees. In such cases, the employer must also pay additional amounts to cover the interest that could have been earned had the contributions been paid into a fund. These additional amounts are calculated by applying the first interest factor to the unpaid contributions for the financial year in which they were due, and the second interest factor for any subsequent years. Employers must ensure they adhere to these requirements to avoid any additional financial liability.
The PB Act imposes several obligations on employers and employees. Employers must ensure that they make the required superannuation contributions to eligible employees, office holders, and contractors, and that they join them to a fund to receive these contributions. They must also be prepared to pay the additional interest amounts if they fail to make the required contributions. Employees, office holders, and contractors covered by the PB Act must remain aware of their eligibility for the superannuation arrangements and their entitlements under the Act. Any failure by employers to meet their obligations can lead to financial penalties and additional interest liabilities.
The PB Act provides for both civil and criminal consequences for non-compliance. Civil penalties include fines and interest charges as specified in section 8A of the Act. For instance, employers who fail to make the required superannuation contributions or who do not join employees to a fund can be liable to pay interest on the unpaid contributions. Criminal penalties may also apply for more serious breaches, such as fraudulent behaviour or willful neglect, and can result in substantial fines. The maximum penalties are determined by the severity of the breach and are stipulated in the relevant sections of the PB Act.