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 2012 (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 Principal Determination by 365.
The Determination, cited as the Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2012 (No. 1), amends the Principal Determination to provide that the interest rate for the 2012-2013 financial year is 5.67 per cent. This is 2 percentage points higher than the 10 year Treasury Bond rate for April 2012, 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 2012.
A Statement of Compatibility with Human Rights is at Attachment A.
ATTACHMENT A
Overview
The Superannuation (Productivity Benefit) Act 1988 was enacted to provide a superannuation scheme for certain Australian Government employees, office holders, and contractors, supplementing the minimum employer superannuation requirements under the Superannuation Guarantee (Administration) Act 1992. The Act was designed to ensure that these specific groups of employees receive a benefit in their superannuation arrangements. The scheme was closed to new participants from 1 July 2006, but continues to apply to those who were already covered by the Act on 30 June 2006 until they leave their employment or join another Australian Government superannuation scheme. The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2012 (No. 1), made under section 4G of the PB Act, was introduced to adjust the penalty interest rate for late employer superannuation contributions for the 2012-2013 financial year to 5.67 per cent, reflecting a 2 percentage point increase over the 10-year Treasury Bond rate for April 2012 as published by the Reserve Bank of Australia. This amendment was enacted by the Minister for Finance and Deregulation and is a legislative instrument under the Legislative Instruments Act 2003.
Scope and Application
The Superannuation (Productivity Benefit) Act 1988 applies to specific Australian Government employees, office holders, and contractors, providing them with superannuation arrangements based on the minimum employer superannuation requirements outlined in the Superannuation Guarantee (Administration) Act 1992. These arrangements, which were closed to new employees as of 1 July 2006, remain applicable to individuals who were covered by the Act on 30 June 2006 until they cease their relevant employment or join an Australian Government superannuation scheme. The Act mandates employer superannuation contributions and the payment of penalty interest in cases of late payments, with the interest rate determined by the Minister under section 4G of the Act. The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2012 (No. 1) amends the Principal Determination to set the interest rate at 5.67 per cent for the 2012-2013 financial year, reflecting the 10-year Treasury Bond rate for April 2012 as published by the Reserve Bank of Australia. This Determination is a legislative instrument under the Legislative Instruments Act 2003 and commenced on 1 July 2012.
Key Provisions
The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2012 (No. 1) amends the penalty interest calculation for superannuation contributions under the Superannuation (Productivity Benefit) Act 1988 (PB Act). Specifically, section 4G of the PB Act mandates that penalty interest on late employer superannuation contributions be calculated according to a rate determined by the Minister. The Amendment Determination sets the interest rate for the 2012-2013 financial year at 5.67 per cent, as stipulated in section 4G (subsections 4E, 4EA, and 4F). This rate is established to ensure that employers who delay their contributions compensate for the lost opportunity cost of interest, reflecting a rate higher than the 10-year Treasury Bond rate for April 2012, as published by the Reserve Bank of Australia.
The Amendment Determination imposes obligations on employers who are required to make superannuation contributions under the PB Act. These employers must ensure that their contributions are made on time and, if they fail to do so, must calculate and pay the penalty interest at the specified rate. The obligation extends to employers who are not part of the new arrangements but were covered under the Act before 1 July 2006. For these employers, the requirement remains in effect until they cease their relevant employment or become members of another Australian Government superannuation scheme.
Failure to comply with the requirements of the Amendment Determination can lead to significant financial penalties. While the Determination itself does not explicitly outline penalties for non-compliance, penalties for late payments of superannuation contributions under the PB Act are set out in other sections of the Act. Generally, these penalties can include financial fines and legal action, which may result in additional costs for the employer. The maximum penalties for non-compliance with superannuation laws can be substantial, reflecting the importance of timely contributions to superannuation funds.