Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Ralph Willis, MP)Chapter 13 - Superannuation guarantee
Overview
13.1 The amendments made in Part 2 of Schedule 2 of the Bill will ensure that the annual superannuation contribution requirement applying until 30 June 1994 under the superannuation guarantee regime is retained until the regime is more established.
Summary of the amendments
13.2 The amendments to the Superannuation Guarantee (Administration) Act 1992 (SGAA) will ensure that contributions made at any time during a year or by the 28th day following the end of the year satisfy an employer's obligations to make superannuation guarantee contributions for that year. The effect of the amendments is to defer quarterly contributions and extend the present annual contribution requirement to the 1994-95 year and later years. [Item 12]
13.3 The amendments will apply from 1 July 1994. [Subclause 2(3)]
Background to the legislation
13.4 The Treasurer's Superannuation Policy Statement of 28 June 1994 announced that the SGAA would be amended to defer the introduction of quarterly superannuation guarantee contributions and extend the annual contribution requirement.
13.5 For superannuation guarantee purposes the level of superannuation support that an employer is required to make is measured on the basis of a 'contribution period'. Subsection 6(1) of the SGAA defines a contribution period for the 1993-94 year or any later year as:
'a period of three months commencing on 1 July, 1 October, 1 January, or 1 April...'.
13.6 Currently subsections 23(6) and 23(6A) allow such contributions to be made annually for the 1992/93 and 1993/94 years.
13.7 The obligation for employers to make superannuation guarantee contributions quarterly rather than annually would add to the current problem of small superannuation amounts because it would increase substantially the number of small superannuation contributions required to be paid into superannuation funds.
13.8 Therefore the SGAA is to be amended to extend an employer's entitlement to make annual contributions until the superannuation guarantee regime is more settled and established. The obligation for superannuation contributions to be made by employers on a quarterly basis will then be introduced with 12 months notice to employers.
Explanation of the amendments
13.9 Contributions made in the period starting on the first day of a year and ending 28 days after the end of the year can be taken into account as if they had been made in any of the contribution periods in the year. [Item 12; new subsection 23(6A)]
13.10 The entitlement to make annual contributions contained in the amendment to subsection 23(6A) applies to the 1993-94 year and later years. [Item 12; new subsection 23(6B)]
13.11 The Bill will make a consequential amendment to subsection 23(7) to remove the entitlement to treat contributions made within 28 days after the end of a contribution period as having been made during that contribution period. [Item 13]
13.12 Under the annual contribution regime proposed by new subsection 23(6A) , contributions made 28 days after the end of a year are treated as having been made during any contribution period during that year. The extension of time to make contributions in the existing subsection 23(7) was included solely to accommodate the requirement to make quarterly superannuation guarantee contributions.
13.13 The Bill will also make consequential amendments to subsections 23(2), (3), (4) and (5). These amendments will ensure that in calculating the amount under these subsections by which the charge percentage for an employer under section 20 or 21 is reduced, one or more superannuation guarantee contributions made under new subsection 23(6A) are treated as if they were made during the contribution periods in that year. [Items 8 to 11]