Commonwealth Numbered Regulations - Explanatory Statements

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SUPERANNUATION GUARANTEE (ADMINISTRATION) REGULATIONS (AMENDMENT) 1996 NO.148

STATUTORY RULES 1996 No. 148

Issued by authority of the Assistant Treasurer

Superannuation Guarantee (Administration) Act 1992

Superannuation Guarantee (Administration) Regulations (Amendment)

These regulations insert Regulations 7A and SA into the Superannuation Guarantee (Administration) Regulations. Regulation 7A sets the rate for the nominal interest component, which is prescribed under subsection 31(1) of the Act, at 10% per annum. Regulation 8A sets the penalty rate for late payment of Superannuation Guarantee Charge (the charge), which is prescribed under subsection 49(2) of the Act, at 10% per annum.

Section 80 of the Superannuation Guarantee (Administration) Act 1992 (the Act) provides that the Governor-General may make regulations prescribing matters required to give effect to the Act.

Under the Act, an employer who does not make the minimum level of superannuation contributions into a complying fund on behalf of employees is required to pay the Superannuation Guarantee charge (the charge).

The charge is imposed on the employer's superannuation guarantee shortfall and comprises three components including a nominal interest component.

In cases where the charge remains unpaid after the time when it became payable, an additional amount is payable as a penalty under section 49 of the Act.

Unlike a late payment penalty which seeks to compensate the revenue for the late payment, the non-final interest component (as used also in the penalty component) seeks to compensate an employee for loss of earnings (interest) that would have been derived from a Superannuation fund had the employer made superannuation contributions into such a fund.

Subsections 31(1) and 49(2) of the Act make reference to interest being calculated at the rate applicable under the relevant regulations. Regulations specifying these rates have not been prescribed for these subsections. In the absence of such regulations, transitional provisions have applied to set the rate of interest for both subsections at 10% per annum. This provision has, however, a limited life. Subsection 47(1) of the provision limits the calculation of the nominal interest component applicable under subsection 31(1) and any additional superannuation charge under subsection 49(2) to any you prior to the commencement of Schedule 5, namely the 1994195 year and prior years.

A problem therefore arises after the 1995196 year when the shortfall component of the charge relating to the 1995-96 year is crystallised 28 days after the end of the contribution period (ie. on the 28th July 1996). The transitional provision will no longer apply and therefore the nominal interest component will be zero. Likewise these same transitional provisions will no longer apply to the operation of subsection 49(2) with the result that any additional penalty charge payable under this subsection will be zero.

The Government considers it appropriate that the rate of interest applicable for the nominal interest component (under section 31) and the penalty for any unpaid charge (under section 49) should remain at 10% per annum. Accordingly, the regulations prescribe that rate.

Details of the amending regulations are as follows:

Regulation 1 amends the Superannuation Guarantee (Administration) Regulations as set out in the amending Regulations. The note to regulation 1 provides that the amending regulations will commence on gazettal.

Regulation 2 inserts new Regulation 7A.

New regulation 7A provides that the nominal interest component of the Superannuation Guarantee Charge, as stipulated in subsection 31(1) of the Act, will be 10% per annum.

Regulation 3 inserts new Regulation 8A.

New regulation 8A provides that for any additional superannuation guarantee charge by way of penalty under subsection 49(2) of the Act, attracts a penalty at the rate of 10% per annum.