EXPLANATORY STATEMENT
STATUTORY RULES 1990 NO.176
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY AUTHORITY OF THE MINISTER FOR FINANCE
DECLARATION UNDER SECTION 4G
INTEREST IN RESPECT OF PERIOD OF DELAY
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.
Section 4G of the Act provides that the interest fixed under it for the purposes of sections 4E and 4F is calculated in a way determined by the Minister.
Paragraph 4E(b) provides for interest to be paid on the amount accrued as interim benefit under section 8A where the amount was not paid on the day on which the employee became a member of a fund. Interest is payable in respect of the period commencing on the day on which payment should have been made and ending on the day before the day when payment was made.
Paragraph 4F(1)(b) provides for interest to be paid on an instalment of continuing contributions which was not paid on the day on which it was payable (either the employee’s pay day or a day agreed between the employer and the fund trustees). Interest is payable in respect of the period commencing on the day on which payment should have been made and ending on the day before the day when payment was made.
The determination provides for interest to be calculated on all amounts which should have been paid on a given day in respect of the period of delay. It is based on an interest rate of 0.1555 which is the equivalent of 2 per cent per annum higher than the rate used to establish the first and second interest factors for benefit calculation purposes under the Act. The formula used to calculate penalty interest is:
Amount x Interest x Days
365
Where Amount is the amount which should have been paid on a day, Interest is the interest rate and Days is the number of days from and including the day on which a payment should have been made and up to and including the day before that payment was made.
Overview
The Superannuation (Productivity Benefit) Act 1988 was enacted to ensure that Australian Government employees without other superannuation coverage are eligible for a productivity benefit. This Act provides a structured mechanism for employers to make periodic contributions to a superannuation fund based on the employee's salary, with a focus on providing greater benefits to lower-paid wage earners. The Act was designed to address the gap in superannuation coverage for certain government employees and was enacted by the Australian Parliament. The policy objective is to secure the financial well-being of these employees by ensuring they receive a superannuation benefit, including interest on any delayed payments, which is calculated to reflect a premium rate of 2% per annum above standard rates.
Scope and Application
The Superannuation (Productivity Benefit) Act 1988 applies to Australian Government employees who do not have other superannuation coverage, ensuring they receive a 3 per cent superannuation benefit. This Act mandates designated employers of such employees to make periodic contributions to a superannuation fund, calculated based on the employee's salary and adjusted for part-time employment. Additionally, employers are required to pay a once-only amount for the employee's entitlement under the former Superannuation Benefit (Interim Arrangement) Act 1988 and for contributions that would have been made had the employee joined a fund on 1 July 1990. The employer must also account for interest on these payments and penalty interest for any delays in payment, with interest calculated using a specific formula as per the Act.
The Act applies across the Commonwealth, ensuring uniform application to all relevant employers and employees within Australia. Section 4G of the Act allows the Minister for Finance to determine the method of calculating interest, with the current formula using an interest rate of 0.1555, which is 2 per cent higher than the rate used for benefit calculation. This Act extends its application through subordinate instruments, allowing for the detailed regulation of contributions, interest calculations, and penalty impositions.
Key Provisions
The Superannuation (Productivity Benefit) Act 1988 (the Act) primarily serves to provide a 3% superannuation benefit to Australian Government employees who are not covered by other superannuation arrangements. Section 4 of the Act mandates that designated employers must make periodic contributions to a superannuation fund nominated by the Minister for Finance or another approved fund. These contributions are calculated using a Table (section 4(1)) that ensures lower-paid employees receive a proportionally higher benefit. For employees not employed full-time, adjustments are made to the contribution amount (section 4(2)). Employers are also required to make a once-only payment to the fund, which includes the employee's entitlement accrued 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 4A).
The Act imposes several obligations on employers. They must ensure timely and accurate payments to the specified superannuation fund. This includes making periodic contributions based on the employee's salary and any additional lump sum payments as outlined in sections 4 and 4A. Employers must also pay interest on the once-only payment and on any missed instalments of continuing contributions (section 4E and 4F). Furthermore, employers are required to calculate and pay penalty interest for any delay in making these payments (section 4G). The Act ensures that if an employee does not become a member of a fund before they become entitled to a benefit, the employer can continue making direct payments (section 4D).
Failure to comply with the provisions of the Act can lead to civil and financial consequences. Employers who fail to make the required contributions, lump sum payments, or interest payments may face financial penalties. The interest rates for late payments are set to be 2% per annum higher than the standard rates used for benefit calculations, as determined by the Minister under section 4G. These rates are applied using the formula specified in the Act, ensuring that the interest is calculated accurately based on the amount owed, the interest rate, and the number of days the payment was delayed. Non-compliance can also result in the employer being liable for any accrued interest and penalties, which could have a significant financial impact.