Superannuation (Productivity Benefit) Declaration No. 7 1991 No. 124
EXPLANATORY STATEMENT
STATUTORY RULES 1991 No. 124
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE
DECLARATION UNDER PARAGRAPH 3E(1)(a)
FIRST INTEREST FACTOR
The Superannuation (Productivity Benefit) Act 1988 (the Act) provides the mechanism by which a 3 per cent superannuation benefit is made available to Australian Government employees without other 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.
The employer is required to pay extra amounts as interest 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)(a) 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 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 during the 1991-92 financial year is 0.11, 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 1991 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 could have been paid (but was not) to a fund during the period 1 July 1991 to 30 June 1992 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.
The declaration commences on 1 July 1991.
Overview
The Superannuation (Productivity Benefit) Act 1988 was enacted by the Parliament of Australia to provide a superannuation benefit for Australian Government employees who do not have other superannuation coverage. The Act enables the Minister for Finance to declare periodic contributions that designated employers must make to a superannuation fund on behalf of these employees, along with provisions for interest on late contributions and penalty interest for delayed payments. The explanatory statement for Statutory Rules 1991 No. 124 clarifies that the Minister is required to declare a first interest factor annually, calculated using a specified formula, to determine the interest accruing on unpaid contributions. For the 1991-92 financial year, the declared first interest factor was 0.11, reflecting half of the assessed secondary market yield of 10-year non-rebate Treasury Bonds as published by the Reserve Bank before 1 June 1991. This declaration ensures that interest accrues daily at a reduced rate, aligning with the Act's intent for contributions to be made periodically rather than in a lump sum.
Scope and Application
The Superannuation (Productivity Benefit) Declaration No. 7, issued under the Superannuation (Productivity Benefit) Act 1988, sets the interest factor for superannuation contributions for the financial year 1991-92. This Act applies to Australian Government employees who are not covered by other superannuation schemes, ensuring they receive a 3% superannuation benefit. Employers designated under this Act are mandated to contribute periodically to a superannuation fund nominated by the Minister for Finance or another approved fund, with additional interest payments required for any unpaid contributions. The interest factor declared is derived from a formula involving a specified rate, in this case, 0.11, which represents half of the assessed secondary market yield of 10-year non-rebate Treasury Bonds last published by the Reserve Bank before 1 June 1991. This interest is applied daily to unpaid contributions from 1 July 1991 to 30 June 1992, reflecting the Act's design to distribute contributions throughout the year rather than in a single payment. The declaration, effective from 1 July 1991, provides a clear framework for the calculation and payment of interest, ensuring compliance and timely contributions to the superannuation funds of eligible employees.
Key Provisions
The Superannuation (Productivity Benefit) Declaration No. 7 1991 No. 124 is a statutory rule issued under the authority of the Minister for Finance, pursuant to the Superannuation (Productivity Benefit) Act 1988. This legislation is designed to ensure that a 3% superannuation benefit is provided to Australian Government employees who do not have other superannuation coverage. Section 3E(1)(a) of the Act requires the Minister to declare a first interest factor before each financial year, which is used to determine the interest accruing on superannuation contributions that are not paid on time. For the 1991-92 financial year, the declared rate is 0.11, reflecting the secondary market yield on 10-year non-rebate Treasury Bonds.
Under the Act, designated employers of eligible employees must make periodic contributions to a superannuation fund nominated by the Minister or an approved alternative fund. This obligation is outlined in section 8A of the Act, which specifies that employers must pay extra amounts as interest on any contributions that were not made on time. Furthermore, employers are required to pay penalty interest for any delays in contributing to the superannuation fund. The declared first interest factor is applied to calculate the interest that accrues on unpaid contributions on a daily basis, with the rate halved to reflect the intended periodic payment structure.
The Act imposes several obligations on designated employers, including timely payment of superannuation contributions and the calculation and payment of interest on any unpaid amounts. Employers must ensure that they remit contributions to the approved superannuation fund as per the stipulated intervals to avoid accruing additional interest charges. The Act also mandates the payment of penalty interest for any period of delay in making contributions, which further incentivizes timely compliance. These obligations are crucial to maintaining the integrity of the superannuation scheme and ensuring that eligible employees receive their benefits without undue delay.
Breach of the obligations stipulated in the Superannuation (Productivity Benefit) Act 1988 can lead to civil or criminal consequences. Employers who fail to make timely contributions or pay the required interest may be subject to penalties. While the specific penalties are not detailed in the explanatory statement, such breaches could potentially result in financial penalties or other enforcement actions. It is important for employers to comply with the Act to avoid these potential consequences and ensure that they are meeting their legal obligations towards their employees’ superannuation benefits.