Superannuation (Productivity Benefit) Declaration No. 8 1991 No. 125
EXPLANATORY STATEMENT
STATUTORY RULES 1991 No. 125
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE
DECLARATION UNDER PARAGRAPH 3E(1)(b)
SECOND 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 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.
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.
Paragraph 3E(1)(b) 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 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 (but were not) 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, 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 had accrued prior to the date on which the person became a member of a fund or entitled to a benefit.
The declaration commences on 1 July 1991.
Overview
The Superannuation (Productivity Benefit) Declaration No. 8 1991 No. 125, issued under the Superannuation (Productivity Benefit) Act 1988, was enacted by the Australian Parliament to address the issue of providing a 3% superannuation benefit to Australian Government employees who do not have other superannuation coverage. This Act ensures that designated employers contribute periodically to a superannuation fund on behalf of their employees, which includes the calculation and payment of interest and penalty interest in cases of delay. The explanatory statement for this statutory rule clarifies that the Minister for Finance is required to declare the second interest factor before each financial year, which is used to determine the interest accruing on superannuation benefits. The declaration for the 1991/92 financial year specifies a rate of 0.11, based on the assessed secondary market yield of 10-year non-rebate Treasury Bonds published by the Reserve Bank prior to 1 June 1991. This interest accrues on a daily basis on amounts that had accumulated before the employee became a member of a fund or was entitled to a benefit.
Scope and Application
The Superannuation (Productivity Benefit) Declaration No. 8 1991 No. 125 under the Superannuation (Productivity Benefit) Act 1988 applies specifically to Australian Government employees who do not have other superannuation coverage, with the designated employers of such employees being required to make periodic contributions towards their superannuation. The Act mandates that these contributions be made to a superannuation fund either nominated by the Minister for Finance or another approved by the Minister. Furthermore, employers are required to make a once-only payment encompassing the employee's accrued entitlement under the former Superannuation Benefit (Interim Arrangement) Act 1988 and any contributions that would have been due had the employee joined a fund on 1 July 1990. The Act also stipulates additional payments for interest on these contributions and any delays in payments. The geographic and jurisdictional reach of this Act is limited to Commonwealth employees, and the Act's provisions extend through subordinate instruments that specify interest rates and calculation methods for interest accruals.
Key Provisions
The Superannuation (Productivity Benefit) Declaration No. 8 1991 No. 125, issued under the Superannuation (Productivity Benefit) Act 1988, primarily addresses the calculation of the second interest factor for the 1991/92 financial year. This factor is essential for determining the interest that accrues on superannuation benefits for Australian Government employees without other superannuation coverage. According to section 3E(1)(b) of the Act, the Minister for Finance is required to declare this second interest factor before each financial year, using a formula that includes a specified rate. The declared rate for the 1991/92 financial year is 0.11, which corresponds to the secondary market yield for 10-year non-rebate Treasury Bonds last published by the Reserve Bank before 1 June 1991. This formula is used in subsection 8A(2) to calculate the interest on amounts accrued under the former Superannuation Benefit (Interim Arrangement) Act 1988, as well as on contributions that should have been made and the interest on those contributions.
The Act imposes specific obligations on employers who are designated to contribute to the superannuation funds of Australian Government employees without other superannuation coverage. Under section 3E(2), these employers must make periodic contributions to the superannuation fund nominated by the Minister for Finance or another approved fund, based on the employee’s salary. Additionally, employers are required to make a once-only payment that includes the employee’s accrued entitlement under the previous Act and the contributions that would have been made had the employee joined a fund on 1 July 1990. Employers must also account for any delays in making these payments by paying extra amounts as interest and penalty interest, as outlined in the Act. These requirements ensure that employees receive the superannuation benefits they are entitled to, along with the applicable interest.
Failure to comply with the obligations set out in the Act can lead to significant consequences. Although the specific offences and penalties are not detailed in the explanatory statement, it is clear that the Act imposes strict requirements for the timely and accurate payment of superannuation contributions and interest. Penalties for non-compliance could include financial penalties or other civil or criminal consequences, although the exact nature and extent of these penalties are not specified in the provided text. It is likely that penalties would be substantial to ensure adherence to the Act’s provisions, given the importance of superannuation contributions to the financial security of Australian Government employees.