EXPLANATORY STATEMENT
STATUTORY RULES 1990 NO. 173
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY AUTHORITY OF THE MINISTER FOR FINANCE
DECLARATION UNDER PARAGRAPH 3E(1)(a)
FIRST INTEREST FACTOR
The Superannuation (Productivity Benefit) Act 1988 provides the mechanism by which a 3 per cent superannuation benefit is made available to Australian Government employees without other superannuation coverage.
The designated employers of such employees are 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 amount to be contributed is calculated using a Table set out in a Schedule to the Act. The Table is structured so that a proportionally greater benefit is provided to lower paid wage earners. The amount to be contributed is adjusted where the employee is not employed full-time.
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.
The Act also provides a mechanism for the continued payment of a benefit directly by the employer where the employee does not become a member of a fund before becoming entitled to a benefit.
Paragraph 3E(1)(a) of the Superannuation (Productivity Benefit) 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 is 0.1355, 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 1990 in respect of 10-year non-rebate Treasury Bonds.
The declaration specifies that the formula to be used to ascertain the declared first interest factor is:
Interest x Days
730
where Interest is the interest rate and Days is the number of days between the end of the first pay period after 1 July 1990 and the day when the amount is to be ascertained:
• in the case of an employee who becomes a member of a fund, the day when the first instalment of continuing contributions is due to be paid under section 4F;
• in the case of an employee who becomes entitled to an interim benefit, the date when the employee became entitled;
• in the case of an employee who neither becomes a member of a fund or becomes entitled to an interim benefit, 30 June 1991.
The effect of this formula is that interest accrues on a daily basis on each amount which could have been paid to a fund at half the rate set out in the declaration. The halving of the interest rate takes into account the fact that the Act’s intention is that amounts be paid at intervals throughout the year, rather than in a lump sum at the beginning of the year.