explanatory statement
ISSUED BY THE MINISTER FOR FINANCE AND DEREGULATION
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
DECLARATION UNDER PARAGRAPH 3E(1)(a)
SUPERANNUATION (PRODUCTIVITY BENEFIT) (2012-2013 FIRST INTEREST FACTOR) DECLARATION 2012
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) (2012-2013 First Interest Factor) Declaration 2012, specifies the formula for the first interest factor to be used for the 2012-2013 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 2012-2013 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 2012 of 3.67 per cent.
The Declaration should be read in conjunction with the Superannuation (Productivity Benefit) (2012-2013 Second Interest Factor) Declaration 2012.
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 2012.
A Statement of Compatibility with Human Rights is at Attachment A.
ATTACHMENT A
Overview
The Superannuation (Productivity Benefit) Act 1988 was enacted to provide superannuation arrangements for specific Australian government employees, office holders and contractors, ensuring they receive superannuation benefits equivalent to those required under the Superannuation Guarantee (Administration) Act 1992. These arrangements were closed to new participants from 1 July 2006 but continue to apply to those already covered on 30 June 2006 until they cease employment or join another government scheme. The Superannuation (Productivity Benefit) (2012-2013 First Interest Factor) Declaration 2012, issued under the authority of the Minister for Finance and Deregulation, specifies the first interest factor to be applied for the financial year 2012-2013, ensuring interest accrues on unpaid contributions as if they had been paid into a fund. The Declaration uses a formula based on the 10-year Treasury Bond rate for April 2012 of 3.67 per cent, and it is a legislative instrument under the Legislative Instruments Act 2003. The Declaration is read in conjunction with the Superannuation (Productivity Benefit) (2012-2013 Second Interest Factor) Declaration 2012 and commences on 1 July 2012.
Scope and Application
The Superannuation (Productivity Benefit) Act 1988 applies to specific Australian Government employees, office holders and contractors who were covered by the Act on 30 June 2006 and continues to apply to them until they cease relevant employment or become a member of an Australian Government superannuation scheme. This legislation is responsible for establishing superannuation arrangements based on the minimum employer superannuation requirements outlined in the Superannuation Guarantee (Administration) Act 1992. However, it is noteworthy that the arrangements under this Act are closed to new employees as of 1 July 2006. The geographic reach of the Act is confined to Australia, and its application extends to the Commonwealth level. The Superannuation (Productivity Benefit) (2012-2013 First Interest Factor) Declaration 2012, which is a subordinate instrument of the Act, specifies the formula for the first interest factor to be used for the 2012-2013 financial year, and it is calculated based on the 10 year Treasury Bond rate for April 2012 of 3.67 per cent. The Declaration should be read in conjunction with the Superannuation (Productivity Benefit) (2012-2013 Second Interest Factor) Declaration 2012.
Key Provisions
The main operative sections of the Superannuation (Productivity Benefit) (2012-2013 First Interest Factor) Declaration 2012 include the declaration of the first interest factor, which is mandated under section 3E(1)(a) of the Superannuation (Productivity Benefit) Act 1988 (the PB Act). This section requires the Minister to declare the first interest factor before each financial year, based on a formula that calculates the periodic interest that would have been earned if the contributions had been held in a fund. The declaration for the 2012-2013 financial year was made in this instrument and specifies that the first interest factor should be based on the 10 year Treasury Bond rate for April 2012, which was 3.67 per cent.
The obligations and requirements imposed by the Act on the parties it governs include the necessity for employers to make superannuation contributions to eligible employees as stipulated by the Act. These contributions are to be made in accordance with the minimum employer superannuation requirements under the Superannuation Guarantee (Administration) Act 1992. Employers must ensure that these contributions are paid to a superannuation fund. If an employer fails to do so, they must pay additional amounts calculated using the first interest factor to compensate for the interest that would have been earned had the contributions been paid into a fund. This ensures that employees receive the full benefits of their superannuation contributions.
In terms of civil or criminal consequences for breach, the Superannuation (Productivity Benefit) Act 1988 imposes penalties for non-compliance with the superannuation guarantee provisions. While the specific penalties are not detailed in the explanatory statement for the Declaration, it is known that the Superannuation Guarantee (Administration) Act 1992 provides for penalties that can include fines and imprisonment for serious or repeated breaches. Employers who fail to make the required superannuation contributions can be subject to these penalties, reflecting the seriousness of ensuring that employees receive their entitled superannuation benefits. The Declaration itself, being a legislative instrument, does not impose penalties but ensures that the correct interest factors are applied for calculating unpaid contributions.