Superannuation (Productivity Benefit) Declaration No. 12 1992 No. 181
EXPLANATORY STATEMENT
STATUTORY RULES 1992 No. 181
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE
DECLARATION UNDER PARAGRAPH 3E(1)(b)
SECOND 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.
Employers are required as well to pay to the same fund, on a once-only basis, an amount being the entitlement accrued by the employee under the former Superannuation Benefit (Interim Arrangement) Act 1988 and an amount in respect of contributions which would have been paid after 1 July 1990 had the employee joined a fund on that date.
The employer is required to pay extra amounts as interest on the once-only payment and on any contributions which were 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 was paid.
Paragraph 3E(1)(b) 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 second interest factor for that year". Subsection 3E(2) 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 second 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:
• the amount accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 up to 30 June 1990;
• amounts which should have been paid (but were not) as continuing contributions in financial years commencing on or after 1 July 1990 but before the year in which the payment is made; and
• amounts which would have accumulated as interest on continuing contributions in financial years following 1 July 1990 but before the year in which payment is made.
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 that interest accrues on a daily basis on each amount which had accrued prior to the date on which the person became a member of a fund or entitled to a benefit.
The Declaration commences on 1 July 1992.
Overview
The Superannuation (Productivity Benefit) Act 1988 was enacted to provide a superannuation benefit mechanism for Australian Government employees who do not have any other employer-sponsored superannuation coverage. This legislation ensures that designated employers are obligated to make periodic contributions to a superannuation fund, as nominated by the Minister for Finance, based on the employee's salary. The Act also mandates that employers make a once-only payment for any accrued entitlements under the former Superannuation Benefit (Interim Arrangement) Act 1988 and for contributions that would have been made if the employee had joined a fund on 1 July 1990. Additionally, employers are required to pay interest on these amounts and any penalties for delayed payments. The Superannuation (Productivity Benefit) Declaration No. 12 1992, issued under the authority of the Minister for Finance, specifies the second interest factor to be used in calculating the interest accruing on these superannuation amounts for the 1992-93 financial year. This declaration ensures the application of a consistent and formulaic approach to determining interest rates, thereby maintaining the integrity of superannuation benefits for eligible employees.
Scope and Application
The Superannuation (Productivity Benefit) Declaration No. 12 1992 applies to employers designated under the Superannuation (Productivity Benefit) Act 1988, specifically those who are responsible for Australian Government employees without other employer-sponsored superannuation coverage. This includes Commonwealth entities and other designated employers who are mandated to make periodic contributions to a superannuation fund on behalf of their employees. The geographic reach of this legislation is national, as it applies to designated employers across Australia, ensuring a uniform application of superannuation benefits for government employees. The Act does not explicitly state exclusions or thresholds but generally targets employers within the specified category. The application of the Act may be extended or modified through subordinate instruments, as indicated by the requirement for the Minister to declare a second interest factor annually, which is subject to change based on specified market conditions. This declaration ensures that interest rates applied to superannuation contributions and accrued benefits are aligned with prevailing economic conditions.
Key Provisions
The Superannuation (Productivity Benefit) Declaration No. 12 1992 No. 181 provides a framework for the calculation of interest on superannuation contributions for Australian Government employees who lack other employer-sponsored superannuation coverage. Under section 3E(1)(b) of the Superannuation (Productivity Benefit) Act 1988, the Minister for Finance is required to declare, before each financial year, the second interest factor to be applied in calculating the interest on superannuation contributions. This declaration is critical as it sets the rate to be used in the specified formula for determining the interest that accrues on amounts under the Superannuation Benefit (Interim Arrangement) Act 1988 and on any unpaid contributions and interest from 1 July 1990 onwards.
In line with these provisions, employers of Australian Government employees without other superannuation coverage are obligated to make periodic contributions to the superannuation fund nominated by the Minister or another approved fund. These contributions are based on the employee's salary. Additionally, employers must make a once-only payment to cover the employee's entitlement accrued under the former Superannuation Benefit (Interim Arrangement) Act 1988, along with any contributions that would have been made if the employee had joined a fund on 1 July 1990. Employers are also required to pay extra amounts as interest on these once-only payments and on any missed contributions. Furthermore, they must compensate for any delays in making these payments by paying penalty interest.
Failure to comply with the obligations and requirements set forth in the Superannuation (Productivity Benefit) Act 1988 can result in significant consequences. Employers who do not make the required contributions or payments within the specified timeframes may incur penalties. The Act does not explicitly state the maximum penalties for non-compliance, but it is implied that failure to adhere to the declared interest factors and payment schedules could lead to financial penalties and legal repercussions. The precise penalties may vary based on the nature and extent of the breach but could include fines or other financial liabilities.