Commonwealth Numbered Regulations - Explanatory Statements

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SUPERANNUATION (PRODUCTIVITY BENEFIT) (2002-2003 SECOND INTEREST FACTOR) DECLARATION 2002 2002 NO. 134

STATUTORY RULES 2002 No. 134

SUPERANNUATION (PRODUCTIVITY BENEFIT) ACT 1988

ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE AND ADMINISTRATION

DECLARATION UNDER SECTION 3E(1)(b)

SUPERANNUATION (PRODUCTIVITY BENEFIT) (2002-2003 SECOND INTEREST FACTOR) DECLARATION 2002

The Superannuation (Productivity Benefit) Act 1988 (the PB Act) provides the mechanism by which the Superannuation Guarantee (SG) minimum superannuation contribution is made available to Commonwealth 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 periodic contributions in respect of those employees to a superannuation fund nominated or approved by the Minister for Finance and Administration. Where the employee is eligible, contributions may be paid to another regulated superannuation fund as defined by the Superannuation Industry (Supervision) Act 1993. The contribution rates are set down in the PB Act or in instruments under the PB Act.

Employers are also required to pay to the same fund, on a once only basis, any entitlement accrued by the employee under the then Superannuation Benefit (Interim Arrangement) Act 1988 in respect of employment with that employer before 1 July 1990.

The contributions provided for under the PB Act are guaranteed to employees where an employer fails to join an employee to a scheme. The employer is required to pay extra amounts as interest on those contributions, to take account of loss of interest arising because contributions have not been paid to a fund on behalf of the employee.

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. 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 second 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:

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

•       contributions which should have been paid (but were not) under the PB Act to a superannuation fund in financial years 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 contributions which were due to be paid under the PB Act in financial years following 1 July 1990 up to the end of the financial year in which the payment is made.

This Declaration cited as the Superannuation (Productivity Benefit) (2002-2003 Second Interest Factor) Declaration 2002, specifies that the rate to be used in the formula for the 2002-2003 financial year is 0.0610, which is the 10 year Treasury Bond rate at April 2002 expressed as a decimal.

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 became entitled to a benefit under the PB Act.

The Declaration commences on gazettal.