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 2013 (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 2013 (No. 1), amends the Principal Determination to provide the interest rate for financial years commencing from 1 July 2013. The interest rate reflects the estimated closing yield last published by the Reserve Bank of Australia before 1 June in the financial year immediately preceding the relevant financial year in respect of 10-year non‑rebate Treasury Bonds, plus 2 percent.
In previous years, the interest rate has been determined annually, prior to each financial year, with the intention of setting the rate according to the same criteria as is prescribed by the Determination. Referencing the Treasury Bond rate allows the Determination to have perennial application, negating the need for annual determinations.
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 2013.
A Statement of Compatibility with Human Rights is at Attachment A
ATTACHMENT A
Overview
The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2013 (No. 1) was enacted to address the need for an updated methodology in calculating penalty interest rates under the Superannuation (Productivity Benefit) Act 1988. The Act originally provided for superannuation arrangements for specific Australian Government employees, office holders, and contractors, but closed to new employees from 1 July 2006. The problem it aimed to address was the need for a consistent and updated approach to calculating penalty interest, which is paid when employer superannuation contributions are made late. The determination was made by the Minister under section 4G of the Act, and the policy objective was to streamline the calculation process by referencing the estimated closing yield of 10-year non-rebate Treasury Bonds published by the Reserve Bank of Australia. This approach was intended to eliminate the need for annual amendments and ensure a perpetual application of the penalty interest calculation.
Scope and Application
The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2013 (No. 1) amends the Superannuation (Productivity Benefit) (Penalty Interest) Determination 1995 to modify the method of calculating penalty interest for late employer superannuation contributions under the Superannuation (Productivity Benefit) Act 1988. This Act applies to Australian Government employees, office holders, and contractors who were covered by the superannuation arrangements before 1 July 2006 and continue to be governed by the Act until they cease relevant employment or join an Australian Government superannuation scheme. The penalty interest is applicable for any delay in paying employer superannuation contributions, with the interest rate now determined by the estimated closing yield of 10-year non-rebate Treasury Bonds published by the Reserve Bank of Australia, plus 2 percent, applicable from financial years commencing 1 July 2013. This legislative instrument, which is of a minor or machinery nature, does not require consultation and commenced on 1 July 2013.
Key Provisions
The Superannuation (Productivity Benefit) (Penalty Interest) Amendment Determination 2013 (No. 1) amends the existing penalty interest calculation under the Superannuation (Productivity Benefit) Act 1988 (the PB Act). Specifically, it modifies the interest rate used for calculating penalty interest for late employer superannuation contributions (sections 4E, 4EA, and 4F). The amendment is set out in Section 4G of the PB Act, which allows the Minister to determine the interest rate for penalty interest calculations. The amendment provides a new method for calculating the interest rate, which is based on the estimated closing yield of 10-year non-rebate Treasury Bonds published by the Reserve Bank of Australia plus 2 percent. This change aims to streamline the process by referencing the Treasury Bond rate, thereby avoiding the need for annual amendments to the interest rate.
Under the PB Act, employers are required to make superannuation contributions on behalf of certain Australian Government employees, office holders, and contractors. These contributions must be made to a fund in accordance with the provisions outlined in sections 4E, 4EA, and 4F. If an employer fails to make these contributions on time, they must also pay penalty interest to account for the interest that would have been earned had the contributions been made on time. The penalty interest is calculated based on the interest rate determined by the Minister under Section 4G. This interest rate is now to be calculated using the formula specified in the Amendment Determination, which references the Treasury Bond rate. This ensures that the penalty interest calculation is consistent and predictable, based on a reliable financial benchmark.
The Amendment Determination imposes specific obligations on employers who are required to make superannuation contributions under the PB Act. They must ensure that contributions are made on time, and if they are not, they must calculate and pay the penalty interest using the updated interest rate formula. This involves monitoring the interest rate set by the Reserve Bank of Australia and applying the correct percentage as specified in the Determination. Employers must also maintain accurate records of their contributions and any penalty interest paid, as these records may be required for compliance and auditing purposes.
Failure to comply with the requirements of the PB Act, including the timely payment of superannuation contributions and the calculation of penalty interest, can result in civil or criminal consequences. The specific penalties for non-compliance are not detailed in the Amendment Determination but are likely to be outlined in the PB Act itself or in related legislation. Generally, penalties for failing to make required superannuation contributions can include fines and interest on unpaid amounts, with the potential for criminal charges in cases of serious or repeated breaches. Employers should ensure they are fully aware of their obligations under the PB Act and the Amendment Determination to avoid these potential penalties.