Family Law and super splitting

Step 6—The Member benefit is flagged for reduced entitlement

Once a court order or superannuation agreement has been properly served, ComSuper, on behalf of the Trustees, will put the order or agreement into effect. This will involve:

• flagging the member's record to indicate reduced entitlements based on the terms of the court order or superannuation agreement
• notifying the member of the action taken within 28 days of receiving a court order or superannuation agreement and either:
  • reducing scheme pension payments to the member (if the member's benefit is in the payment phase) or
  • keeping a separate account of the member entitlement (if the member's benefit is in the growth phase).

When is the member's benefit reduced?

Payment phase
Where the member's interest is in the payment phase (i.e. the member is in receipt of a pension), the member's benefit is reduced with effect from the operative time of the family law split. ComSuper will implement the payment split as soon as possible after the operative time.

Growth phase
If the member's benefit is in the growth phase (i.e. the member is a contributor or is a person to whom a deferred benefit may become payable in the future), the member's benefit is not reduced at the operative time of the family law split. Instead, the member's benefit will be reduced when it becomes payable to the member.

How is the member's benefit reduced?

Reduction of later standard pension (Defence Force Retirement and Death Benefits (Family Law Superannuation) Orders 2004) (PDF 414KB)

Where a standard pension becomes payable to a member spouse at a time after the operative time:

To calculate the member entitlement it is necessary to first calculate the non-member spouse (NMS) percentage of the benefit using the formula:

Hypothetical %age entitlement × NMS entitlement ÷ 100

The hypothetical percentage entitlement is the percentage of the annual rate of salary that would have been attributable to the member spouse as pension immediately before the operative time if the member had been able to retire at the operative time. This percentage is calculated using factors determined by an Actuary.

The non-member spouse entitlement is the percentage amount to be allocated to the non-member spouse under the terms of the splitting order or agreement.

The pension payable to the member spouse is then reduced to an amount calculated using the following formula:

(pre split retirement %age – NMS %age) × member salary on retirement

The non-member spouse percentage (NMS %age) is the proportion of the hypothetical pension entitlement of the member that relates to the non-member spouse calculated using the formula in (1) above.

The pre-split retirement percentage is the percentage of the annual rate of salary that would have been applicable to the member spouse at retirement if there had not been a payment split.

 Reduction of lump sum components (Defence Force Retirement and Death Benefits (Family Law Superannuation) Orders 2004 (PDF 414KB)

Where a lump sum benefit becomes payable to a member spouse at a time after the operative time:

To calculate the member entitlement it is necessary to first calculate the non-member spouse amount of the benefit using the formula:

(1) NMS Amount = (Hypothetical member amount × Transfer amount) ÷ ( Scheme value + surcharge debt)

The hypothetical entitlement is the amount of the lump sum that would have been attributable to the member spouse immediately before the operative time if the member had been able to retire at the operative time. This amount is calculated using factors determined by an Actuary.

Transfer amount is the amount payable to the non-member spouse under the terms of the splitting order or agreement.

The lump sum payable to the member spouse is reduced to an amount calculated using the following formula:

(2) pre-split retirement amount - NMS amount

The non-member spouse (NMS) amount is the amount of the hypothetical entitlement of the member that relates to the non-member spouse calculated using the formula in (1) above.

The pre-split retirement amount is the lump sum that would have been applicable to the member spouse at retirement if there had not been a payment split.

Reduction of Defence Act entitlements

 Reduction of the Defence Act (Productivity Benefit Scheme) entitlements of DFDRB members (Actuarial Methodology and Factors (PDF 254KB))

• At the operative time ComSuper will identify the 3% benefit and the Superannuation Guarantee (SG) top-up amount (if any).
• An adjustment factor is calculated as follows:

Adjustment Factor = Transfer amount ÷ (Scheme value + surcharge debt.)

• Amounts in the notional Productivity and SG accounts that should be established at the operative time are then obtained by multiplying each of the values in step (i) by the reduction factor identified in step (ii).

• The accounts accumulate with the interest rate applying to the productivity benefits until the time of payment.

• Where, at the time benefits are payable, no SG top-up is payable to the member (i.e. because the member has an entitlement to pension) the top-up amounts in the notional SG account are reset to zero.

Step 7a—Commencing split pension benefits to the Member and associate (if the Member is already receiving a pension payment phase)

When is the associate benefit payable?

An associate scheme pension arising from the split of a member's benefit which is in the payment phase (i.e. the split of a pension) is payable with effect from the operative time (Section 80D of the DFRB Act 1948 or Section 49E of the DFRDB Act 1973 (PDF 699KB)).

The commencement date of the scheme pension will generally be the first available pension payday after the operative time subject to receipt of a benefit application from the associate which provides the Trustees with all the information necessary to commence payment of the pension. Pensions are normally paid fortnightly on Thursdays although this may vary to accommodate public holidays, especially around Christmas and New Year.

Due to administrative constraints and pensin cut-off dates, please note that there may be a delay in reducing the Member's pension to reflect the family law split, following the service of orders upon the Trustee. An indicative time frame is 4-8 weeks to implement the split. Members should be aware that any overpayments of the unreduced pension will need to be repaid. Associates should be aware that there may be a delay in the commencement of the new pension for a similar timeframe.

Commutation of Small Pensions (Section 80C of the DFRB Act 1948 and DFRB Orders 2004 (PDF 306KB) or Section 49C of the DFRDB Act 1973 (PDF 699KB) and DFRDB Orders 2004 (PDF 306KB)).

Where the value of an associate standard pension is less than $1300 per annum (indexed twice yearly from 1 January 2005), then the associate member may elect to commute the pension to a lump sum equivalent to the value of the transfer amount from which the pension is derived.

The election must be made in writing to the Trustees no later than 3 months after the non-member spouse becomes entitled to the pension.

What benefits are payable?

If, at the operative time, standard scheme pension is payable to the member, then the associate is entitled to associate scheme pension from the operative time, at the rate calculated under the DFRB (Family Law Superannuation Orders) 2004 (PDF 306KB) by reference to the transfer amount.

Note:

While the Member and associate Member benefits are based on the Member pension, the formula used to calculate the amount of each benefit has regard to the age and life expectancy of the parties. As a result, the sum of the split benefits can be more or less than the pension benefit previously paid to the member.

When is the Member's benefit reduced?

A member's scheme pension arising from the split of a benefit will be reduced with effect from the operative time.

The actual commencement date of the reduced scheme pension will be the first available pension payday after the operative time although this may vary to accommodate public holidays, especially around Christmas and New Year.

Due to administrative constraints and pension cut-off dates, please note that there may be a delay in reducing the Member's pension to reflect the family law split, following the service of orders upon the Trustee. An indicative time frame is 4-8 weeks to implement the split. Members should be aware that any overpayments of the reduced pension will need to be repaid. Associates should be aware that there may be a delay in the commencement of the new pension for a similar timeframe.

How are payment phase benefits increased?

The reduced Member benefit and the associate benefit are indexed in the same way the Member's scheme pension benefit was indexed prior to the family law split—i.e. twice yearly in January and July in line with increases in the
Consumer Price Index (CPI).

In January and July of each year, Members and associate Members receive letters advising them of any increases to their pensions .

Step 7b (i)—Keeping separate accounts and reporting (where the member is a contributor or has a preserved benefit—growth phase)

How is the associate benefit increased?

The benefit of a non-member spouse arising from a Member's interest in the DFRDB is created as an associate B benefit in the MSB scheme.

The associate B benefit represents an untaxed employer component of the benefit and increases at the long-term Treasury bond rate between the operative time and the date when the associate benefit becomes payable.

How is the Member's benefit increased?

The taxed and untaxed components of the Member's benefit will be increased in the same manner as those components were increased prior to the split of the benefits.

As stated elsewhere, a Member's benefit in the growth phase is not actually reduced at the operative time of the family law split. However, in order to accurately reflect the Member's entitlement, any annual member statements and benefit estimates provided after the operative time of the split will be qualified as being subject to a reduced entitlement for the member as a result of the split.

Annual member statements

The member and associate member will receive annual statements, which reflect the split benefit, in accordance with the requirements of the Superannuation Industry (Supervision) Act 1993 (PDF 162KB) (SIS).

If the operative time of the benefit split is before 1 July, ComSuper will send out a statement for the associate member before the end of the calendar year and annually thereafter. Where the operative time of the benefit split is after 1 July, the first statement will be sent out before the end of the following calendar year.

The member spouse will continue to receive annual statements in the normal manner. However, details of entitlements after adjustment to take account of the family law split will be advised in a separate attachment to the annual statement.

A member or associate member may request information on the value of his or her entitlement at any time by contacting ComSuper on 1300 001 677.

Step 7b (ii)—Payment of the benefit (where the member is a contributor or has a deferred benefit—growth phase)

When is the benefit payable to the associate?

The benefit arising from the split of a Member's benefit in the growth phase (that is, the split of the entitlement of a DFRDB contributor or person with a deferred benefit) will become payable to an associate member in the circumstances set out in Division 13 of the MSB Rules (PDF 437KB).

An associate is eligible to claim a benefit from the date he or she reaches preservation age or in the circumstances detailed below. Where the associate has not reached preservation age eligibility to claim benefits is also subject to the Superannuation Industry (Supervision) legislation (PDF 162KB).

To be paid a benefit, the associate Member must make a written application requesting that the benefits be paid and provide any necessary information to the Trustees

 Frequently asked questions

Can I request information for the purpose of a pre-nuptial agreement?
Yes. A member, or a person planning to marry the member, may request information for the purposes of entering into a pre-nuptial agreement. The process described in this publication should be followed to seek information and arrange a valuation for a pre-nuptial agreement.

What is my preservation age?

The law places restrictions on when you can access lump sums. One of these restrictions relates to you reaching your 'preservation age' and is in addition to the other restrictions on withdrawing your benefit.
You generally cannot access your entire benefit as a cash lump sum until you reach your preservation age.

Is a lump sum payable to an associate superannuation lump sum payment for tax purposes?
Yes. Growth phase lump sums are treated as superannuation lump sum payments and taxed accordingly.

Is an associate scheme pension subject to Pay As You Go (PAYG) tax?
Yes. Associate pensions are subject to PAYG tax but tax concessions may apply.

Does the Member spouse still have the responsibility for the payment of any surcharge debt after a family law split?
Yes. For members whose benefits are in growth phase (i.e. the member is a contributor or has a deferred benefit), the member will be responsible.

For members in payment phase who have chosen to discharge a surcharge debt by receiving a reduced pension, the associate benefit will be based on the already reduced scheme pension.

Can an associate make contributions to the scheme?
No. The associate cannot make contributions to the scheme.

Can an associate pay money from another superannuation scheme into the MSBS?
No. The associate cannot pay in a transfer amount.

Can the Member spouse's reduced entitlement be split again under another family law split?
Yes. The Member spouse's reduced entitlement can be split again under another family law court order or superannuation agreement under Part VIIIB of the Family Law Act some time in the future. (This answer applies to the DFRDB even though the member's benefit is not actually reduced until it becomes payable.)

Can the associate's entitlement also be split under another family law split?
Yes. The associate entitlement can also be split under another family law court order or superannuation agreement under Part VIIIB of the Family Law Act some time in the future.

What happens when an associate member in receipt of an associate scheme pension dies?
If the associate member in receipt of an associate scheme pension dies, there is no residual for dependants. The benefit ends at that time.

Basic terminology

Terms under Part VIIIB of the Family Law Act 1975 (PDF 128KB) or the Family Law (Superannuation) Regulations 2001

Base amount

a dollar figure set out in a court order or superannuation agreement that is allocated to the non-member spouse from the member spouse's superannuation entitlement.

Court order

an order issued by the Family Court or the Federal Magistrates Court. A court order can be obtained by consent if the parties agree.

Growth phase

the situation where the member spouse is a contributor or is a person to whom a deferred benefit may become payable in the future.

Member spouse

the party whose superannuation entitlement is being split under a family law splitting order or superannuation agreement under Part VIIIB of the Family Law Act (PDF 128KB).

Non-member spouse

the other party to the family law splitting order or superannuation agreement under Part VIIIB of the Family Law Act (PDF 128KB).

Operative time

the date of effect of the split—this is the date specified in a court order; or 4 business days after a superannuation agreement is served on a Trustee.

Payment phase

the situation where the member spouse is in receipt of a scheme pension from the DFRB or DFRDB.

Specified percentage

a percentage amount set out in a splitting order under section 90MT or a payment split agreement under section 90MJ that is to be allocated to the non-member spouse. See also splitting percentage below.

Splitting percentage

a percentage amount set out in a court order or superannuation agreement that is to be allocated to the non-member spouse.

Superannuation agreement

an agreement between the member spouse and non-member spouse that complies with certain legal requirements set out in the Family Law Act 1975 (PDF 128KB) .

Term under the Defence Force Retirement and Death Benefits Act 1973

DFRDB Authority is the Defence Force Retirement and Death Benefits Authority established under section 8 of the DFRDB Act and has responsibility for the general administration of the DFRB, DFRDB and Defence Productivity Benefits Schemes. It comes under the extended meaning of 'trustee' contained in section 90MDA of the Family Law Act. All references in this publication to Trustees are references to the DFRDB Authority.

Terms under the Superannuation Legislation Amendment (Family Law and Other Matters) Act 2004

Associate

the term used to describe the non-member spouse with an entitlement to DFRDB benefits following a family law split.

Associate pension

the associate member's entitlement in the DFRDB as a result of the split of a member's benefit in payment phase under a court order or superannuation agreement under Part VIIIB of the Family Law Act (PDF 128KB).

Family law value

the value of the person's super under the Family Law (Superannuation) Regulations (PDF 732KB) (using the scheme specific factors and methodology approved by the Attorney General in the Family Law (Superannuation) (Methods and Factors for Valuing Particular Superannuation Interests) Approval 2003 Volume 2 (PDF 528KB) .

Non-standard pension

any scheme pension that is not a standard pension.

Scheme value

the value of the person's super using Ministerial Orders.

Standard pension

any scheme pension other than one that cannot be split (e.g. children's pension and orphans' pensions).

Splitting percentage

a percentage amount set out in a court order or superannuation agreement that is to be allocated to the non-member spouse.

Transfer amount

the amount that is being transferred to the non-member spouse as the starting value of their interest in the scheme.

Terms under the Military Superannuation and Benefits Amendment Trust Deed 2004 (No. 1)

Associate B benefit

the entitlement of an associate in the MSBS as a result of the split of a member's benefit that is in growth phase under a court order or superannuation agreement under Part VIIIB of the Family Law Act (PDF 1258KB) .

An associate B benefit

comprises employer untaxed component of the transfer amount.

Employer unfunded component

of an MSBS transfer amount is the amount based on a former DFRDB member's unfunded productivity benefit.

Transfer amount

the amount that is being transferred to the non-member spouse as the starting value of their interest in the scheme.

Total and permanent incapacity

person is totally and permanently incapacitated:

"if the [MSB] Board decides that by reason of the person's physical or mental incapacity, the person has become unlikely ever to be able to work in employment for which he or she is reasonably qualified by education, training or experience or for which the person may reasonably be qualified after retraining."

More information

Publications

• DFRB (Family Law Superannuation) Orders 2004 (PDF 30Kb)
• DFRDB (Family Law Superannuation Orders) 2004 (PDF 306KB)

DFRDB telephone enquiry line
1300 001 677

Address:
Unit 4
Cameron Offices
Chandler Street
Belconnen, ACT 2617

Postal address:
PO Box 22
Belconnen, ACT 2616

Fax:
(02) 6272 9616

TTY:
(02) 6272 9827

Email:
members@dfrdb.gov.au

ComSuper contact details for request for superanuation information

Mail:
PO Box 22
Belconnen ACT 2616

Fax:
(02) 6272 9616

Hand delivery:
Unit 4
Cameron Offices
Chandler St
Belconnen, ACT 2617

ComSuper contact details for family law court orders, superannuation agreements or related correspondance

Mail:
PO Box 22
Belconnen ACT 2616 (express post preferred)

Fax:
(02) 6272 9838 (this fax number is only for family law court orders, superannuation agreements and any related correspondence)

Hand delivery:
Unit 4
Cameron Offices
Chandler St
Belconnen, ACT 2617

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