EXPLANATORY STATEMENT
ISSUED BY THE MINISTER FOR FINANCE AND DEREGULATION
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
DECLARATION UNDER PARAGRAPH 3E(1)(b)
SUPERANNUATION (PRODUCTIVITY BENEFIT) (2012-2013 SECOND 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)(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.
The Declaration, cited as the Superannuation (Productivity Benefit) (2012-2013 Second Interest Factor) Declaration 2012, specifies the formula for the second interest factor to be used for the 2012-2013 financial year. The formula is based on the 10 year Treasury Bond rate for April 2012 of 3.67 per cent.
The second interest factor is used in section 8A of the PB Act to accrue interest for 2012‑2013 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.
The declaration should be read in conjunction with the Superannuation (Productivity Benefit) (2012-2013 First 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 (PB Act) was enacted by the Australian Parliament to provide superannuation arrangements for certain Australian Government employees, office holders, and contractors, ensuring these individuals received minimum employer superannuation contributions. The Act was designed to address the gap in superannuation coverage for these specific groups, offering them a structured retirement benefit aligned with broader superannuation regulations. The Act closed to new employees from 1 July 2006, but continues to apply to those who were covered as of 30 June 2006 until they cease relevant employment or join another Australian Government superannuation scheme. The Superannuation (Productivity Benefit) (2012-2013 Second Interest Factor) Declaration 2012, issued under paragraph 3E(1)(b) of the PB Act, specifies the formula for calculating the second interest factor for the 2012-2013 financial year, which is based on the 10 year Treasury Bond rate for April 2012. This declaration ensures that interest is accurately accrued on unpaid employer contributions, maintaining the integrity of the superannuation arrangements provided under the PB Act.
Scope and Application
The Superannuation (Productivity Benefit) Act 1988 applies to certain Australian Government employees, office holders, and contractors who were covered by the Act on 30 June 2006. This legislation continues to provide for superannuation arrangements for these individuals until they cease relevant employment or become members of an Australian Government superannuation scheme. The Act ensures employer superannuation contributions are guaranteed to these employees, with additional amounts payable by employers in the event of non-compliance. The Superannuation (Productivity Benefit) (2012-2013 Second Interest Factor) Declaration 2012, issued under the Act, specifies the formula for the second interest factor applicable for the 2012-2013 financial year, based on the 10-year Treasury Bond rate for April 2012. The declaration, which is a legislative instrument under the Legislative Instruments Act 2003, is used to calculate the interest accruing on unpaid employer contributions for the specified financial year. It should be read in conjunction with the corresponding First Interest Factor declaration for the same financial year. The declaration commenced on 1 July 2012, and no consultation was undertaken as it is considered to be of a minor or machinery nature.
Key Provisions
The Superannuation (Productivity Benefit) (2012-2013 Second Interest Factor) Declaration 2012, under the Superannuation (Productivity Benefit) Act 1988 (the "PB Act"), specifies the formula for the second interest factor to be used for the 2012-2013 financial year. This declaration (section 3E(1)(b)) is based on the 10-year Treasury Bond rate for April 2012, which is 3.67 per cent. The second interest factor is a critical component in section 8A of the PB Act, as it is applied to accrue interest on unpaid employer contributions from previous financial years and the interest applied to those amounts using either the first interest factor or the second interest factor for those years.
The PB Act governs superannuation arrangements for certain Australian Government employees, office holders, and contractors, ensuring that employer superannuation contributions are guaranteed. For employees who were covered under the Act on 30 June 2006, the arrangements continue until they cease their employment or join an Australian Government superannuation scheme. The Act was closed to new employees from 1 July 2006. Employers must ensure they join employees to a fund to receive contributions, and if they fail to do so, they are required to pay extra amounts in respect of interest that could have been earned. These additional amounts are calculated by applying the first and second interest factors to the unpaid contributions.
The PB Act imposes several obligations on employers and employees. Employers must join eligible employees to a superannuation fund to receive contributions, and if they fail to do so, they must make additional payments as interest on the unpaid contributions. Employees covered by the Act are entitled to these superannuation arrangements and the interest accruals as provided. The Act also mandates that the Minister for Finance and Deregulation must declare the second interest factor before each financial year, ensuring transparency and predictability in the application of the interest rates.
Breach of the provisions under the PB Act can lead to civil or criminal consequences. Employers who fail to make the required superannuation contributions or the additional interest payments may face penalties. The exact penalties are not specified in the explanatory statement but typically include fines and other civil remedies. Employers are also subject to audits and investigations by the Australian Taxation Office to ensure compliance with the Act. Failure to comply can result in severe penalties, including substantial fines and potential criminal charges for willful breaches.