Superannuation (Productivity Benefit) 1994-1995 Penalty Interest Determination No. 2 1994 No. 211
EXPLANATORY STATEMENT
STATUTORY RULES 1994 No. 211
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE
DETERMINATION UNDER SECTION 4G
PENALTY INTEREST
The Superannuation (Productivity Benefit) Act 1988 (the Act) provides the mechanism by which productivity superannuation is made available to Australian Government employees who have no other employer sponsored superannuation coverage.
From 1 July 1990 the designated employers of such employees are required to pay to either the superannuation fund nominated by the Minister for Finance, or another superannuation fund approved by the Minister, periodic contributions based on the salary of the employee.
Employers are required as well to pay to the same fund, on a once only basis, an amount being the entitlement accrued by the employee under the former Superannuation Benefit (Interim Arrangement) Act 1988 and an amount in respect of contributions which would have been paid after 1 July 1990 had the employee joined a fund on that date. The employer is required to pay penalty interest in respect of any period of delay between the date when an amount should have been paid to a fund and the date when it was paid.
Section 4G of the Act provides that the interest fixed under it for the purposes of sections 4E, 4EA and 4F is calculated in a way determined by the Minister.
Paragraph 4E (b) provides for interest to be paid on the amount accrued as an interim benefit under section 8A where the amount was not paid on the day on which the employee became a member of a fund. Interest is payable in respect of the period commencing on the day on which payment should have been made and ending on the day before the day when payment was made. Section 4EA provides for interest to be paid on the amount accrued as an interim benefit under section 8A where the amount was not paid on the day on which the employee became a member of the superannuation scheme established under the Superannuation Act 1976 or the Superannuation Act 1990. Interest is payable in respect of the period commencing on the day on which payment should have been made and ending on the day before the day when payment was made.
Paragraph 4F (1) (b) provides for interest to be paid on an instalment of continuing contributions which was not paid on the day on which it was payable (either the employee's pay day or a day agreed between the employer and fund trustees). Interest is payable in respect of the period commencing on the day on which payment should have been made and ending on the day before the day when payment was made.
The Determination provides for interest to be calculated on all amounts which should have been paid on a given day in respect of the period of delay. It is based on an interest rate of 0. 1045 which is equivalent to 2 per cent per annum higher than the rate used to establish the first and second interest factors for benefit calculation purposes under the Act. The formula used to calculate penalty interest during the 1994-95 financial year is specified in the Determination.
The Determination commences on 1 July 1994.
Overview
The Superannuation (Productivity Benefit) 1994-1995 Penalty Interest Determination No. 2 1994 No. 211, issued under the authority of the Minister for Finance, addresses the need for penalty interest calculations for superannuation contributions under the Superannuation (Productivity Benefit) Act 1988. This Act was introduced to provide a mechanism for productivity superannuation to Australian government employees without other employer-sponsored superannuation coverage. The Penalty Interest Determination outlines the method for calculating penalty interest on delayed contributions, ensuring compliance with the Act's requirements for timely payments and interest accruals from the date contributions should have been made until the date of actual payment. The policy objective is to maintain the integrity and timely administration of superannuation contributions and associated penalties as specified by the Act.
Scope and Application
The Superannuation (Productivity Benefit) 1994-1995 Penalty Interest Determination No. 2 1994 No. 211, issued under the authority of the Minister for Finance, applies to employers of Australian Government employees who are not covered by any other employer-sponsored superannuation scheme. These employers are obligated to make periodic contributions to a superannuation fund, as specified by the Minister for Finance or another approved fund, based on the employee’s salary, and to pay an amount corresponding to the employee's accrued entitlement under the former Superannuation Benefit (Interim Arrangement) Act 1988. Additionally, the Determination mandates that employers pay penalty interest for any delays in these payments, calculated according to a specific formula based on an interest rate 2% higher than the rate used for benefit calculation purposes under the Superannuation (Productivity Benefit) Act 1988. The interest accrues from the day the payment should have been made until the day before it is actually paid. This Determination applies nationally, encompassing all employers of relevant Australian Government employees, and it came into effect on 1 July 1994.
Key Provisions
The Superannuation (Productivity Benefit) 1994-1995 Penalty Interest Determination No. 2 (1994 No. 211) outlines the rules for calculating penalty interest under the Superannuation (Productivity Benefit) Act 1988 (the Act) for delayed payments related to productivity superannuation. Specifically, section 4G of the Act, which allows for the determination of interest rates, is referenced here. The Determination sets out the interest rate and the method for calculating penalty interest for periods of delay between the due date and the actual date of payment to a superannuation fund. This applies to various instances, including payments that should have been made under sections 4E, 4EA, and 4F of the Act, which cover interim benefits and continuing contributions. The penalty interest rate is fixed at 0.1045, which is 2% higher than the rate used for benefit calculation purposes.
Under this Determination, employers who are designated to make periodic contributions to a superannuation fund for employees without other employer-sponsored superannuation coverage have specific obligations. They must ensure timely payments to the superannuation fund nominated by the Minister for Finance or another approved fund. Employers are required to remit periodic contributions based on the employee’s salary and make a lump sum payment that includes the entitlement accrued under the former Superannuation Benefit (Interim Arrangement) Act 1988 and any missed contributions post 1 July 1990. If these payments are delayed, employers must also account for the penalty interest calculated according to the rules set forth in the Determination.
The Determination also includes provisions for penalties and consequences of non-compliance. Employers who fail to make timely payments to the superannuation fund are subject to penalty interest as calculated by the formula specified in the Determination. This penalty interest is intended to compensate for the delay in payment and to encourage timely compliance with the statutory requirements. The interest is calculated from the date the payment should have been made until the date it is actually made, thereby imposing a financial disincentive for late payments.
In summary, the Superannuation (Productivity Benefit) 1994-1995 Penalty Interest Determination No. 2 establishes a clear framework for calculating penalty interest for delayed superannuation contributions. Employers have the obligation to make timely payments to the designated superannuation fund and to account for any penalty interest due in the event of delays. Non-compliance with these requirements can result in financial penalties, which serve as a deterrent against late payments and ensure that superannuation funds receive the contributions owed to them in a timely manner.