Commonwealth Numbered Regulations - Explanatory Statements

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SUPERANNUATION (PRODUCTIVITY BENEFIT) 1997-98 FIRST INTEREST FACTORDECLARATION 1997 NO. 145

STATUTORY RULES 1997 No. 145

SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988

ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE

DECLARATION UNDER SECTION 3E(1)(a)

FIRST INTEREST FACTOR

The Superannuation (Productivity Benefit) Act 1988 (the PB Act) provides the mechanism by which the Superannuation Guarantee (SG) is made available to Australian Government employees who have no other employer sponsored superannuation coverage. Prior to 1 July 1992, the PB Act provided productivity superannuation to these employees.

Since 1 July 1990 the designated employees of such employers have been required to pay to the superannuation fund nominated by the Minister for Finance, or another superannuation fund approved by the Minister, or to a regulated 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 the entitlement accrued under the then 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 made to take account of loss of interest since contributions began to accumulate on behalf of the employee and before such contributions are paid into a fund.

Paragraph 3E(1)(a) of the PB Act required 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 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.

The declaration specifies that the rate to be used in the formula for the 1997-98 year is 0.0783 ), which is the rate expressed as a decimal per annum that is the estimated closing yield last published before 1 June 1997 in respect of 10-year non-rebate Treasury Bonds (ie 7.83 per cent. per annum).

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 1997 to 30 June 1998 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 later in the year. The rate would apply for zero days to amounts payable on the last day of the financial year.

The Declaration commences on 1 July 1997.