EXPLANATORY STATEMENT
ISSUED BY THE MINISTER FOR SUPERANNUATION AND CORPORATE LAW ACTING FOR AND ON BEHALF OF THE MINISTER FOR FINANCE AND DEREGULATION
Superannuation (Productivity Benefit) Act 1988
DETERMINATION UNDER SECTION 4G
SUPERANNUATION (PRODUCTIVITY BENEFIT) (PENALTY INTEREST) AMENDMENT DETERMINATION 2008 (NO. 1)
The Superannuation (Productivity Benefit) Act 1988 (the PB Act) provides superannuation arrangements, based on the minimum employer superannuation requirements envisaged in the Superannuation Guarantee (Administration) Act 1992, for certain Australian Government employees, office holders and contractors (employees).
The superannuation arrangements under the PB Act were closed to new employees from 1 July 2006. However, they continue to apply to persons who were covered by the Act on 30 June 2006 until they cease relevant employment or become a member of an Australian Government superannuation scheme.
Sections 4E, 4EA and 4F of the PB Act provide for the employer superannuation contributions that are to be paid to a fund in respect of an employee under the Act. Where the payment is made late, the employer is also required to pay extra amounts, as penalty interest, to take account of interest foregone because the employer has delayed paying contributions on behalf of the employee. Penalty interest is payable in respect of any period of delay between the date when an amount should have been paid into a fund and the date when it was paid.
Section 4G of the PB Act provides that the interest for the purposes of sections 4E, 4EA and 4F is calculated in a way determined by the Minister. The Superannuation (Productivity Benefit) (Penalty Interest) Determination 1995 (the Principal Determination), made under section 4G of the PB Act, provides that penalty interest is a daily rate calculated by dividing an annual interest rate for the relevant financial year specified in the Determination by 365.
This Determination, cited as the Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2008 (No. 1), amends the Principal Determination to provide that the interest rate for the 2008-2009 financial year is 8.29 per cent. As noted in the Principal Determination, this is 2 percentage points higher than the 10 year Treasury Bond rate for April 2008, as published by the Reserve Bank of Australia.
The Determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003 (LI Act).
No consultation was undertaken in relation to this Determination. In accordance with paragraph 18(2)(a) of the LI Act, consultation was considered to be unnecessary because the instrument is of a minor or machinery nature.
The Determination commences on 1 July 2008.
Overview
The Superannuation (Productivity Benefit) Act 1988 was enacted to provide a superannuation scheme for certain Australian Government employees, office holders, and contractors, ensuring they received minimum employer superannuation contributions as envisioned under the Superannuation Guarantee (Administration) Act 1992. The Act was designed to address the gap in superannuation arrangements for these specific groups and was closed to new participants from 1 July 2006, continuing only for those already covered by 30 June 2006 until they ceased their relevant employment or joined another Australian Government superannuation scheme. The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2008 (No. 1), made under the authority of the Minister for Superannuation and Corporate Law acting on behalf of the Minister for Finance and Deregulation, adjusts the penalty interest rate for late employer superannuation contributions for the 2008-2009 financial year to 8.29 per cent, in accordance with the legislative requirements outlined in the PB Act. This amendment was made without consultation, deemed unnecessary due to its minor nature under the Legislative Instruments Act 2003.
Scope and Application
The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2008 (No. 1) amends the Superannuation (Productivity Benefit) (Penalty Interest) Determination 1995, which was made under section 4G of the Superannuation (Productivity Benefit) Act 1988. This legislation applies to Australian Government employees, office holders, and contractors who were covered by the Act as of 30 June 2006, continuing to govern their superannuation arrangements until they cease relevant employment or become members of an Australian Government superannuation scheme. The Amendment Determination specifically adjusts the interest rate used to calculate penalty interest for late employer superannuation contributions to 8.29 per cent for the 2008-2009 financial year, which is 2 percentage points higher than the 10-year Treasury Bond rate for April 2008 as published by the Reserve Bank of Australia. This amendment ensures that the penalty interest remains above the broader economic interest rates, thereby maintaining the intended deterrent for late contributions. The Determination is effective from 1 July 2008 and operates within the Commonwealth jurisdiction.
Key Provisions
The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2008 (No. 1) amends the Superannuation (Productivity Benefit) (Penalty Interest) Determination 1995 by changing the annual interest rate for the 2008-2009 financial year to 8.29 per cent, as outlined in sections 4E, 4EA, and 4F of the Superannuation (Productivity Benefit) Act 1988. The amendment to the penalty interest rate is effective for any delay in superannuation contributions, ensuring that employers who fail to make timely payments are required to compensate for the lost interest, which is now calculated based on the revised rate. The new rate is set at 2 percentage points higher than the 10-year Treasury Bond rate for April 2008, as published by the Reserve Bank of Australia. This amendment aims to ensure that the penalty interest accurately reflects the opportunity cost of delayed contributions.
The Superannuation (Productivity Benefit) Act 1988 and the accompanying Determination impose several obligations on employers. Firstly, employers must ensure that they make the required superannuation contributions to a fund on behalf of eligible employees. These contributions are based on the minimum employer superannuation requirements set out in the Superannuation Guarantee (Administration) Act 1992. Employers must also calculate and pay penalty interest if contributions are made late. The penalty interest is intended to compensate for the interest that would have been earned if the contributions had been made on time. Employers must adhere to these requirements to comply with the Act and avoid any financial penalties or legal repercussions.
The Superannuation (Productivity Benefit) Act 1988 does not explicitly outline specific offences or penalties for non-compliance within its text, but it is understood that failure to meet the obligations outlined in sections 4E, 4EA, and 4F could result in civil consequences. Employers who do not make the required superannuation contributions or who fail to pay the penalty interest when contributions are delayed may face legal action from employees or be subject to penalties imposed by the relevant authorities. While the specific penalties are not detailed in the Act, they could include financial penalties, legal costs, and potential reputational damage. The Determination itself is a legislative instrument that ensures the penalty interest is calculated correctly, thereby indirectly supporting compliance with the Act.
The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2008 (No. 1) is a legislative instrument under the Legislative Instruments Act 2003. The making of this Determination was considered to be of a minor or machinery nature, which is why consultation was deemed unnecessary. The Determination comes into effect on 1 July 2008, ensuring that the updated penalty interest rate is applied from the start of the 2008-2009 financial year. This amendment is crucial for maintaining the integrity of the superannuation contributions system and ensuring that employers are fairly compensated for the delay in receiving their contributions.