EXPLANATORY STATEMENT
ISSUED BY THE MINISTER FOR FINANCE AND DEREGULATION
Superannuation (Productivity Benefit) Act 1988
DETERMINATION UNDER SECTION 4G
SUPERANNUATION (PRODUCTIVITY BENEFIT) (PENALTY INTEREST) AMENDMENT DETERMINATION 2010 (NO. 1)
The Superannuation (Productivity Benefit) Act 1988 (the PB Act) provides superannuation arrangements, based on the minimum employer superannuation requirements 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.
The Determination, cited as the Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2010 (No. 1), amends the Principal Determination to provide that the interest rate for the 2010-2011 financial year is 7.71 per cent. This is 2 percentage points higher than the 10 year Treasury Bond rate for April 2010, 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 the 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 2010.
Overview
The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2010 (No. 1) was enacted to update the penalty interest rates for late employer superannuation contributions under the Superannuation (Productivity Benefit) Act 1988. This Act provides superannuation arrangements for certain Australian Government employees, office holders, and contractors, which were closed to new employees from 1 July 2006 but continue to apply to existing covered individuals. The problem the amendment addresses is the need to adjust penalty interest rates, which are applied to late employer contributions, to reflect current financial conditions. This amendment was introduced by the Minister for Finance and Deregulation and is intended to ensure that the penalty interest remains aligned with relevant financial indicators, specifically the 10-year Treasury Bond rate for the specified financial year. The amendment was made under the authority of the Legislative Instruments Act 2003, and as it was considered of a minor or machinery nature, no consultation was required before its enactment. The amendment commenced on 1 July 2010.
Scope and Application
The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2010 (No. 1) amends the Superannuation (Productivity Benefit) (Penalty Interest) Determination 1995 to alter the calculation of penalty interest for late employer superannuation contributions under the Superannuation (Productivity Benefit) Act 1988. This Act applies to specific Australian Government employees, office holders, and contractors who were covered by the Act on 30 June 2006 and remain subject to its provisions until they cease their relevant employment or join an Australian Government superannuation scheme. The amendment affects those employers who have delayed in making their superannuation contributions on behalf of eligible employees, requiring them to pay penalty interest calculated at a daily rate. The Determination specifies that for the 2010-2011 financial year, the interest rate is set at 7.71 per cent, which is two percentage points higher than the 10-year Treasury Bond rate for April 2010 as published by the Reserve Bank of Australia. The Determination is a legislative instrument under the Legislative Instruments Act 2003, and it commences on 1 July 2010.
Key Provisions
The main operative sections of the Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2010 (No. 1) are sections 4E, 4EA, 4F and 4G of the Superannuation (Productivity Benefit) Act 1988 (PB Act), as amended by the Determination. These sections detail the employer superannuation contributions required under the Act and the penalty interest to be paid if contributions are made late. Specifically, section 4E requires the employer to pay superannuation contributions for employees covered by the Act, section 4EA deals with the calculation of these contributions, section 4F mandates the payment of penalty interest when contributions are late, and section 4G sets out how the interest is calculated. The Determination amends the Principal Determination to set the interest rate for the 2010-2011 financial year at 7.71 per cent.
The Superannuation (Productivity Benefit) Act 1988 imposes several obligations on employers and employees covered by the Act. Employers are required to make regular superannuation contributions for their employees in accordance with the Act, and if these contributions are not made on time, employers must also pay penalty interest. Employees, on the other hand, are entitled to receive the superannuation contributions and any applicable penalty interest if contributions are delayed. The Act continues to apply to individuals who were covered by it as of 30 June 2006, even though it is no longer open to new employees. Employers must ensure they are aware of their obligations under the Act to avoid incurring penalty interest and potential legal consequences.
Breaches of the Superannuation (Productivity Benefit) Act 1988, such as failure to make required superannuation contributions or to pay penalty interest when late, can lead to various consequences. Employers who fail to comply with their obligations may be subject to enforcement actions by the Australian Taxation Office or other relevant authorities. The Determination itself does not outline specific penalties, but under the broader provisions of the PB Act, non-compliance can result in financial penalties and legal action. The specific penalties, including maximum fines, are set out in the PB Act and can vary depending on the nature and severity of the breach. Civil or criminal liability may also arise if the failure to comply is deemed to be deliberate or negligent.