Commonwealth Numbered Regulations - Explanatory Statements

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SUPERANNUATION (PRODUCTIVITY BENEFIT) (2000-2001 FIRST INTEREST FACTOR DECLARATION) 2000 NO. 167

STATUTORY RULES 2000 No. 167

SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988

ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE AND ADMINISTRATION

DECLARATION UNDER PARAGRAPH 3E(1)(a)

FIRST INTEREST FACTOR

The Superannuation (Productivity Benefit) Act 1988 (the PB Act) provides the mechanism by which the Superannuation Guarantee (SG) minimum employer superannuation support is made available to Commonwealth sector employees (and certain other employees) who have no other employer-sponsored superannuation cover. Prior to 1 July 1992, the PB Act provided productivity superannuation to these employees.

Since 1 July 1990, the designated employers of employees covered by the PB Act arrangements have been required to pay to the superannuation fund nominated by the Minister for Finance and Administration, or another superannuation fund approved by the Minister, or to a regulated superannuation fund under the Superannuation Industry Supervision legislation (where the employee is eligible), periodic contributions based on the salary of the employee.

Employers are required to pay to the same fund, on a once only basis, an amount being any entitlement accrued under the then Superannuation Benefit (Interim Arrangement) Act 1988 in respect of employment with that employer. Employers are also required to pay an amount in respect of contributions which would have been paid after 1 July 1990 to an employee had the employee been employed by that employer and joined a fund on that date. The employer is required to pay extra amounts, as interest on any contributions which are made, to take account of loss of interest, since contributions were due to be paid on behalf of the employee and before such contributions are paid into a fund.

Paragraph 3E(1)(a) 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 first interest factor for that- year". Subsection 3E(2) of the Act provides that the formula "is to involve the use of a rate specified in the declaration" and "may contain a variable that depends on the period, or another aspect, of the employment of the person in relation to whom the factor is to apply".

The first interest factor is used in subsection 8A(2) of the PB Act to determine the amount that is to accrue during all or part of a financial year on amounts which should have been paid to a superannuation fund as contributions in that year but were not paid on time.

This Declaration cited as the Superannuation (Productivity Benefit) (2000-2001 First Interest Factor Declaration) specifies that the rate to be used in the formula for the 20002001 year is 0.0639, which is the 10 year Treasury Bond rate at April 2000 expressed as a decimal.

The effect of the formula is to accrue interest in a manner similar to that which would have applied if the contributions had been paid into a fund in regular payments throughout the year. The formula provides for interest to accrue on a daily basis on each amount which should have been paid (but was not) to a fund during the period 1 July 2000 to 30 June 2001 at half the rate set out in the declaration. The halving of the interest rate recognises that the full interest rate only applies for a full year, and applies for progressively shorter periods to moneys which would have been payable late in the year.

The Declaration commenced on gazettal.