EXPLANATORY STATEMENT
STATUTORY RULES 1990 NO. 174
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY AUTHORITY OF THE MINISTER FOR FINANCE
DECLARATION UNDER PARAGRAPH 3E(1)(b)
SECOND 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)(b) 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 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 as continuing contributions in financial years commencing on or after 1 July 1990 but before the year in which payment is made; and
• amounts which would have accumulated as interest on continuing contributions in 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 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 second interest factor is:
Interest x Days
365
where Interest is the interest rate and Days is the number of days between the day following the last day of the last pay period before 1 July 1990 and:
• in the case of an employee who becomes a member of a fund, the day when an amount became payable under section 4E (initial contribution) or 4F (continuing contributions) of the Act;
• in the case of an employee who becomes entitled under section 6 to receive an interim benefit, the day when the employee became entitled to receive the benefit;
• in the case of an employee who neither joins a fund nor becomes entitled to a receive a benefit, 30 June 1991.
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.