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 2011 (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 2011 (No. 1), amends the Principal Determination to provide that the interest rate for the 2011-2012 financial year is 7.40 per cent. This is 2 percentage points higher than the 10 year Treasury Bond rate for April 2011, 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 2011.
Overview
The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2011 (No. 1) was enacted to adjust the penalty interest rate applicable to late employer superannuation contributions under the Superannuation (Productivity Benefit) Act 1988. This Act was introduced to address the need for updating penalty interest rates in accordance with changes in the financial environment, ensuring that the interest rates applied remain fair and reflective of current economic conditions. The determination was made by the Minister for Finance and Deregulation under section 4G of the PB Act, with the aim of providing a clear and updated interest rate for the 2011-2012 financial year. This amendment ensures that the penalty interest accurately accounts for the interest that would have been earned if contributions were made on time, thereby maintaining the integrity of the superannuation arrangements for affected employees.
Scope and Application
The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2011 (No. 1) applies to employers and employees covered by the Superannuation (Productivity Benefit) Act 1988, specifically those Australian Government employees, office holders and contractors who were subject to the Act on 30 June 2006. This Act provides for the calculation of employer superannuation contributions and the associated penalty interest for late payments. The Amendment Determination modifies the calculation of penalty interest rates by setting the interest rate at 7.40 per cent for the 2011-2012 financial year, which is 2 percentage points higher than the 10 year Treasury Bond rate for April 2011. This legislative instrument, which is a minor or machinery nature, commenced on 1 July 2011 and does not require consultation as per the Legislative Instruments Act 2003. The scope of the Determination is limited to the financial year specified, and it does not extend to other years without further legislative amendments.
Key Provisions
The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2011 (No. 1) primarily concerns the calculation of penalty interest for late employer superannuation contributions under the Superannuation (Productivity Benefit) Act 1988 (PB Act) (sections 4E, 4EA and 4F). The Act applies to certain Australian Government employees, office holders, and contractors, who were covered by the Act on 30 June 2006, but does not apply to new employees from 1 July 2006 onwards. This amendment specifically adjusts the interest rate used for calculating penalty interest for the 2011-2012 financial year to 7.40 per cent, which is 2 percentage points above the 10 year Treasury Bond rate for April 2011, as published by the Reserve Bank of Australia (section 4G).
Employers governed by the PB Act have the obligation to make timely superannuation contributions on behalf of their eligible employees. When contributions are not paid on time, employers must also pay penalty interest, calculated using the specified rate, to compensate for the interest that would have been earned had the contributions been paid in a timely manner. This requirement ensures that employers are incentivised to meet their superannuation obligations punctually.
Breaches of the requirements to make timely contributions and pay the appropriate penalty interest could result in financial penalties. While the Explanatory Statement does not specify maximum penalties, it is reasonable to infer that non-compliance could lead to civil consequences, including financial penalties that might be determined by the courts or relevant authorities. Additionally, persistent or significant non-compliance could attract the attention of regulatory bodies, potentially resulting in further enforcement actions.