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.
Overview
The Superannuation (Productivity Benefit) Act 1988 was enacted to address the need for superannuation benefits for Australian Government employees who do not have other superannuation coverage. This Act was introduced to provide a 3 per cent superannuation benefit to these employees by requiring designated employers to make periodic contributions to either a superannuation fund nominated by the Minister for Finance or another approved fund. The amount contributed is calculated using a structured Table that ensures a proportionally greater benefit for lower-paid wage earners, and adjustments are made for part-time employment. The Act also mandates employers to make a once-only payment, including accrued entitlements from the former Superannuation Benefit (Interim Arrangement) Act 1988, and to pay interest on any delayed contributions and penalty interest for late payments. Additionally, it allows for the direct payment of benefits by employers if employees do not join a fund before becoming eligible. The Act mandates the Minister for Finance to declare an interest factor annually, calculated using a specified formula involving a rate determined by the Reserve Bank's secondary market yield for 10-year non-rebate Treasury Bonds, to determine the interest accruing on unpaid contributions.
Scope and Application
The Superannuation (Productivity Benefit) Act 1988 applies to Australian Government employees who do not have other superannuation coverage, ensuring they are entitled to a 3 per cent superannuation benefit. This Act mandates designated employers to contribute periodically to either a fund nominated by the Minister for Finance or an approved fund, based on the employee’s salary. The contribution amount is determined using a specific table outlined in a schedule to the Act, which ensures a greater proportional benefit for lower-paid wage earners. Additionally, employers are required to make a one-time payment to the fund, covering the employee's accrued entitlement under the former Superannuation Benefit (Interim Arrangement) Act 1988 and contributions that would have been made had the employee joined a fund on 1 July 1990. The Act also mandates that employers pay interest on these amounts and penalty interest for any delays in payment. The Act applies across the Commonwealth, and its application may be extended or restricted through subordinate instruments issued by the Minister for Finance. The Act does not specify exclusions or exemptions, though its applicability is inherently limited to the defined group of Australian Government employees.
Key Provisions
The Superannuation (Productivity Benefit) Act 1988 is designed to ensure that eligible Australian Government employees receive a 3% superannuation benefit if they are not covered by another superannuation scheme (sections 1 and 2). Employers of these employees must make periodic contributions to a nominated superannuation fund or an approved alternative, calculated based on the employee's salary (section 4). The contribution amount is determined using a table outlined in the Schedule to the Act, which ensures a greater benefit for lower-paid wage earners (Schedule). For employees not working full-time, the contributions are adjusted accordingly (section 4A).
Employers are additionally required to make a one-time payment to the fund, covering the employee's accrued entitlement under the former Superannuation Benefit (Interim Arrangement) Act 1988, as well as any contributions that would have been made had the employee joined a fund on 1 July 1990 (section 6). Furthermore, employers must pay interest on these one-time payments and on any missed contributions, along with penalty interest for any delays in payment (section 7). The Act also allows for continued benefit payments directly from the employer if the employee does not join a fund before becoming eligible for a benefit (section 9).
The Act mandates that the Minister for Finance declare a "first interest factor" each financial year, which is calculated using a specified formula (section 3E). This factor determines the interest that accrues on contributions that should have been paid to a superannuation fund during the financial year (section 8A). The formula incorporates a rate of 0.1355, which is derived from the assessed secondary market yield for 10-year non-rebate Treasury Bonds as published by the Reserve Bank before 1 June 1990 (section 3E(1)(a)). Failure to comply with the Act's requirements can result in significant penalties. Employers who do not make the required contributions or payments can face fines or other civil consequences, while criminal penalties may apply in cases of deliberate non-compliance (section 12). The maximum penalties are stipulated within the Act, providing a clear framework for enforcement.