Commonwealth Numbered Regulations - Explanatory Statements

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SUPERANNUATION (PRODUCTIVITY BENEFIT) 1993-1994 SECOND INTEREST FACTOR DECLARATION 1993 NO. 185

STATUTORY RULES 1993 No. 185

SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988

ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE

DECLARATION UNDER SECTION 3E (1) (b)

SECOND INTEREST FACTOR

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 employersponsored 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 extra amounts as interest on any contributions which are not made.

Paragraph 3E (1) (b) of the 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". Subsection 3 (E)(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 second interest factor is used in subsection 8 A (2) of the Act to determine the amount that is to accrue during all or part of a financial year on:

•       the amount accrued under the Superannuation Benefit (Interim Arrangement) Act 1988 up to 30 June 1990;

•       amounts which should have been paid (but were not) as continuing contributions in financial yews commencing on or after 1 July 1990 but before the year in which the payment is made; and

•       amounts which would have accumulated as interest on continuing contributions in financial years following 1 July 1990 but before the year in which payment is made.

The declaration specifies that the rate to be used in the formula for 1993-94 financial year is 0.0755, which is the rate expressed as a decimal per annum that is the estimated closing yield last published before 1 June 1993 in respect of 10-year non-rebate Treasury Bonds.

The effect of this formula is that interest accrues on a daily basis on each amount which had accrued prior to the date on which the person became a member of a fund or entitled to a benefit.

The Declaration commences on 1 July 1993.