Superannuation (Productivity Benefit) Declaration No. 11 1992 No. 180
EXPLANATORY STATEMENT
STATUTORY RULES 1992 No. 180
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE
DECLARATION UNDER PARAGRAPH 3E(1)(a)
FIRST INTEREST FACTOR
The Superannuation (Productivity Benefit) Act 1988 (the Act) provides the mechanism by which productivity superannuation is made available to Australian Government employees who have no other employer-sponsored superannuation coverage.
From 1 July 1990 the designated employers of such employees have been required to pay to either the superannuation fund nominated by the Minister for Finance or another fund approved by the Minister periodic contributions based on the salary of the employee.
The employer is required to pay extra amounts as interest on any contributions which are not made. The employer is also required to pay penalty interest in respect of any period of delay between the date when an amount should have been paid to a fund and the date when it is paid.
Paragraph 3E(1)(a) of the 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". Subsection 3E(2) of the Act provides that the formula "is to involve the use of a rate specified in the declaration" and "may contain a variable that depends on the period, or another aspect, of the employment of the person in relation to whom the factor is to apply".
The first interest factor is used in subsection 8A(2) of the Act to determine the amount of interest that is to accrue during all or part of a financial year on amounts which should have been paid to a superannuation fund as contributions in that year.
The declaration specifies that the rate to be used in the formula during the 1992-93 financial year is 0.0945, which is the rate expressed as a decimal per annum that is the assessed secondary market yield last published by the Reserve Bank before 1 June 1992 in respect of 10-year non-rebate Treasury Bonds.
The effect of this formula is to accrue interest in a manner similar to that which would have applied had it been paid into a fund in regular payments throughout the year. The formula provides for interest to accrue on a daily basis on each amount which should have been paid (but was not) to a fund during the period 1 July 1992 to 30 June 1993 at half the rate set out in the declaration. The halving of the interest rate recognises that the full interest rate only applies for a full year to contributions payable at the start of the year, and applies for progressively shorter periods to monies which would have been payable later in the year. The rate would apply for zero days to amounts payable on the last day of the year.
The declaration commences on 1 July 1992.
Overview
The Superannuation (Productivity Benefit) Declaration No. 11 1992 No. 180, issued under the authority of the Minister for Finance, serves to establish the first interest factor for the 1992-93 financial year as required by the Superannuation (Productivity Benefit) Act 1988. This Act was introduced to ensure that Australian Government employees without other employer-sponsored superannuation coverage receive productivity superannuation benefits. The Act mandates designated employers to make periodic contributions to a superannuation fund, including interest on delayed contributions and penalty interest for any delay. The Declaration specifies that the interest rate for the 1992-93 financial year is 0.0945, derived from the assessed secondary market yield for 10-year non-rebate Treasury Bonds, to be used in a formula that determines interest accrual in a manner consistent with regular annual payments. This approach ensures the interest is calculated proportionately based on the duration of the delay in contribution payments.
Scope and Application
The Superannuation (Productivity Benefit) Declaration No. 11 1992 applies to Australian Government employees who do not have employer-sponsored superannuation coverage, as well as to their designated employers who are mandated to make periodic contributions to a superannuation fund on behalf of these employees. The Act's jurisdiction encompasses the Commonwealth level, and its provisions extend to ensuring that employers remit contributions to a fund nominated by the Minister for Finance or another approved fund, along with any additional interest on unpaid contributions and penalty interest for delays in payment. The Act provides a specific formula to ascertain the first interest factor, which is used to determine the interest on contributions that should have been made during a financial year but were not. This formula, involving the assessed secondary market yield of 10-year non-rebate Treasury Bonds, ensures interest is accrued in a manner consistent with regular payments throughout the year, adjusted to half the declared rate for contributions that should have been made later in the financial year. The declaration, effective from 1 July 1992, specifies the rate to be used for the financial year 1992-93, thereby formalising the interest accrual mechanism under the Act.
Key Provisions
The Superannuation (Productivity Benefit) Declaration No. 11, issued under Section 3E(1)(a) of the Superannuation (Productivity Benefit) Act 1988, outlines the first interest factor for the financial year 1992-93. This factor, as specified in Section 3E(1)(a), is to be determined by a formula involving a rate declared by the Minister for Finance. For the specified financial year, the rate is set at 0.0945, which is based on the assessed secondary market yield of 10-year non-rebate Treasury Bonds as published by the Reserve Bank before 1 June 1992. This rate is intended to reflect the interest that would accrue if contributions were made in regular payments throughout the year.
The Act mandates that employers of Australian Government employees who do not have other employer-sponsored superannuation coverage must pay periodic contributions to a superannuation fund nominated by the Minister or another approved by the Minister. Employers are also required to pay additional amounts as interest on any unpaid contributions and penalty interest for delays in payment. This ensures that any shortfall in contributions is compensated for with interest, maintaining the integrity of the superannuation benefits intended for the employees.
The declaration imposes several obligations on the parties governed by the Act. Employers must calculate and remit contributions to the specified superannuation funds accurately and on time. They must also account for and pay interest on any delays in contributions and any other relevant penalties. These obligations are designed to ensure that the intended benefits under the Act are preserved and appropriately accrued for the employees.
Failure to comply with the provisions of the Act can result in civil and criminal consequences. Employers who fail to remit contributions or pay interest and penalties as required may face penalties under the Act. The specific penalties for non-compliance are not detailed in the explanatory statement, but generally, breaches of superannuation legislation can result in significant financial penalties and, in some cases, criminal charges. These penalties serve as a deterrent to non-compliance and ensure that the Act's objectives are upheld.