Superannuation (Productivity Benefit) (2011-2012 Second Interest Factor) Declaration 2011

Overview

The Superannuation (Productivity Benefit) (2011-2012 Second Interest Factor) Declaration 2011 was enacted by the Minister for Finance and Deregulation to specify the second interest factor under the Superannuation (Productivity Benefit) Act 1988 for the 2011-2012 financial year. This legislative instrument was issued under paragraph 3E(1)(b) of the Act, which mandates the Minister to declare the second interest factor each financial year based on a specified formula. The problem it addresses is the need to determine the interest factor for superannuation contributions that employers failed to make, ensuring that employees still receive the benefits accrued from those missed contributions. The Declaration sets the second interest factor at 5.40 per cent, calculated from the 10 year Treasury Bond rate for April 2011. The purpose of this Declaration is to ensure the continued application of interest accruals on unpaid employer contributions and related interest amounts, as outlined in section 8A of the PB Act.

Scope and Application

The Superannuation (Productivity Benefit) Act 1988 applies to certain Australian Government employees, office holders, and contractors, providing them with superannuation arrangements based on minimum employer superannuation requirements. These arrangements were closed to new employees as of 1 July 2006 but continue to apply to those who were covered by the Act on 30 June 2006 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 if the employer fails to direct those contributions to a fund, with additional amounts payable by the employer for any interest that may have been earned had the contributions been paid to a fund. The Superannuation (Productivity Benefit) (2011-2012 Second Interest Factor) Declaration 2011 specifies the formula for the second interest factor for the 2011-2012 financial year, which is used to accrue interest on unpaid employer contributions for previous financial years. This declaration is a legislative instrument under the Legislative Instruments Act 2003 and commences on 1 July 2011.

Key Provisions

The Superannuation (Productivity Benefit) (2011-2012 Second Interest Factor) Declaration 2011, as per the Superannuation (Productivity Benefit) Act 1988 (PB Act), specifies the second interest factor for the 2011-2012 financial year, based on the 10-year Treasury Bond rate of 5.40% for April 2011. This interest factor is to be applied under section 8A of the PB Act for the calculation of interest on unpaid employer contributions and previously accrued interest for that financial year (section 3E(1)(b)). It is intended to ensure that employees receive the interest they would have earned if their superannuation contributions had been paid into a fund, as guaranteed by the Act. The PB Act imposes obligations on employers to make contributions to their employees' superannuation arrangements. These obligations are underpinned by the requirement to join employees to a fund to receive those contributions. In the event an employer fails to join an employee to a fund, they are required to make extra payments to the employee to cover the interest that would have been earned if the contributions had been paid into a fund (section 3E(1)(b)). This ensures that employees are not financially disadvantaged due to the employer's failure to comply with their obligations under the Act. Failure to comply with the provisions of the PB Act can lead to civil and criminal consequences. Employers who do not make the required superannuation contributions or who fail to join employees to a fund may be subject to penalties under the Superannuation Guarantee Charge (Administration) Act 1992. The maximum penalties for these offences can be substantial, including fines and imprisonment. The specific penalties are detailed in the relevant sections of the Superannuation Guarantee (Administration) Act 1992, which must be adhered to in conjunction with the PB Act.