EXPLANATORY STATEMENT
ISSUED BY THE MINISTER FOR FINANCE AND DEREGULATION
SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988
DECLARATION UNDER PARAGRAPH 3E(1)(b)
SUPERANNUATION (PRODUCTIVITY BENEFIT) (SECOND INTEREST FACTOR) DECLARATION 2013
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.
The employer superannuation contributions provided for under the PB Act are guaranteed to employees where an employer fails to join the employee to a fund to receive those contributions. In such cases, extra amounts are payable by the employer in respect of interest that may have been earned had those contributions been paid to a fund. These additional amounts are calculated by applying the first interest factor for a financial year to the contributions that were due to be paid, but were not paid, in that year and the second interest factor in respect of any later years.
Paragraph 3E(1)(b) of the PB Act requires the Minister to declare, before each financial year, the factor ascertained using a specified formula that is to be the declared second interest factor for that year.
This Declaration, cited as the Superannuation (Productivity Benefit) (Second Interest Factor) Declaration 2013, specifies the formula for the second interest factor to be used for financial years commencing from 1 July 2013.
The second interest factor is used in section 8A of the PB Act to accrue interest for 2013-14 and each subsequent financial year on the amounts of unpaid employer contributions for previous financial years and the interest that has been applied to those amounts in previous years using either the first interest factor or the second interest factor for those years. The Declaration makes the factor reflect 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.
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 Declaration. Referencing the Treasury Bond rate allows the Declaration to have perennial application, negating the need for annual declarations.
The Declaration should be read in conjunction with the Superannuation (Productivity Benefit) (First Interest Factor) Declaration 2013.
The Declaration is a legislative instrument for the purposes of the Legislative Instruments Act 2003 (LI Act).
No consultation was undertaken in relation to the Declaration. 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 Declaration commences on 1 July 2013.
A Statement of Compatibility with Human Rights is at Attachment A.
ATTACHMENT A
Overview
The Superannuation (Productivity Benefit) (Second Interest Factor) Declaration 2013 was issued under the authority of the Minister for Finance and Deregulation, pursuant to the Superannuation (Productivity Benefit) Act 1988 (PB Act). This legislation was enacted to provide superannuation arrangements for certain Australian Government employees, office holders, and contractors, ensuring that they receive employer superannuation contributions as required by the Superannuation Guarantee (Administration) Act 1992. The PB Act ceased to accept new participants from 1 July 2006 but continues to apply to those already covered by the Act until they leave their relevant employment or join another Australian Government superannuation scheme. The policy objective of this Declaration is to specify the formula for the second interest factor, which is used to calculate the interest on unpaid employer contributions, ensuring these contributions are guaranteed and adjusted for any interest that would have been earned if they had been paid into a superannuation fund. This Declaration reflects the estimated closing yield of 10-year non-rebate Treasury Bonds as published by the Reserve Bank of Australia, thereby providing a consistent and predictable method for calculating interest, rather than requiring annual declarations.
Scope and Application
The Superannuation (Productivity Benefit) (Second Interest Factor) Declaration 2013 applies to the calculation of additional employer superannuation contributions under the Superannuation (Productivity Benefit) Act 1988, which governs the superannuation arrangements for certain Australian Government employees, office holders, and contractors. The Act applies to those individuals who were covered by the arrangements on 30 June 2006, continuing until they cease their relevant employment or become members of an Australian Government superannuation scheme. The Declaration, issued under the authority of the Minister for Finance and Deregulation, specifies the formula for determining the second interest factor to be applied to unpaid employer contributions from financial years commencing 1 July 2013 onwards. This formula is intended to reflect the estimated closing yield of 10-year non-rebate Treasury Bonds, as published by the Reserve Bank of Australia, which allows for perennial application without necessitating annual declarations. The instrument, which is a legislative instrument under the Legislative Instruments Act 2003, does not require consultation as it is deemed minor or of a machinery nature.
Key Provisions
The Superannuation (Productivity Benefit) (Second Interest Factor) Declaration 2013, under section 3E(1)(b) of the Superannuation (Productivity Benefit) Act 1988 (the PB Act), sets out the formula for determining the second interest factor that applies from financial years commencing on 1 July 2013. This declaration is crucial for calculating the additional amounts due from employers in cases where they fail to make required superannuation contributions. Specifically, section 8A of the PB Act mandates that the second interest factor be applied to unpaid employer contributions for previous financial years and the interest that has been accrued on those amounts in previous years. The formula specified in the declaration ties the second interest factor to the estimated closing yield of 10-year non-rebate Treasury Bonds, as last published by the Reserve Bank of Australia before 1 June of the financial year preceding the relevant financial year. This approach ensures a consistent and predictable method for calculating the interest, eliminating the need for annual declarations.
Under the PB Act, certain Australian Government employees, office holders, and contractors are entitled to superannuation arrangements that are based on minimum employer contributions. These arrangements were closed to new employees as of 1 July 2006 but continue to apply to those covered by the Act on 30 June 2006 until they cease their relevant employment or join another Australian Government superannuation scheme. Employers are required to ensure that they make the necessary contributions to eligible employees' funds and, if they fail to do so, they must compensate the employees by paying additional amounts equivalent to the interest that would have been earned if the contributions had been made on time. The Superannuation (Productivity Benefit) (Second Interest Factor) Declaration 2013 provides a clear and consistent method for calculating these additional amounts, ensuring fairness and predictability for both employers and employees.
The obligations imposed by the PB Act and the accompanying declaration are significant. Employers must ensure they are aware of their obligations to contribute to eligible employees' superannuation funds. In cases of non-compliance, they must calculate and pay additional amounts to compensate for the missed contributions and interest. These additional amounts are determined using the specified second interest factor, which is tied to the yield of 10-year non-rebate Treasury Bonds. This requirement ensures that employers are held accountable for their superannuation obligations and that employees receive the benefits they are entitled to. The declaration streamlines the calculation process, making it easier for employers to meet their obligations.
Failure to comply with the requirements of the PB Act and the Superannuation (Productivity Benefit) (Second Interest Factor) Declaration 2013 can result in various consequences. While the explanatory statement does not specify particular offences, penalties, or civil or criminal consequences for breach, it is clear that non-compliance with the Act’s provisions could lead to financial liabilities for employers, as they would be required to compensate employees for unpaid contributions and interest. The precise nature of the penalties or consequences would likely be determined by the terms of the Act and any related regulations or judicial interpretations. Employers must therefore ensure they understand and meet their obligations to avoid any potential penalties or liabilities.