Family Law and super
Splitting of superannuation arrangements—Family Law amendment (Superannuation) ACT 2001
This Act, which establishes Family Law superannuation splitting arrangements, received Royal Assent on 28 June 2001 and will come into effect on a date to be announced or alternatively 18 months after Royal Assent whichever occurs first. The delay is to allow superannuation funds to put in place relevant technology and administrative procedures for the new arrangements. The delay also allows the commencement to be more closely tied to the commencement of regulations which will supply the detail for the scheme but which are not presently available.
Current arrangements
Family law property distributions can presently take into account that one of the parties to a marriage might keep their superannuation and adjust the property settlement accordingly, but the superannuation itself cannot be divided. The purpose of this Act is to enable superannuation to be divided either by agreement of the parties or by the court and to compel trustees to abide by such agreements/orders.
Proposed arrangements
Under the new arrangements, court orders or agreements may specify an amount or percentage by which the superannuation is to be divided. Alternatively, in certain circumstances (eg where the person is approaching retirement and the person's final benefit will shortly be known), the member's superannuation can be the subject of a flagging agreement. This means that rather than splitting the superannuation immediately, the split is delayed until such time as the exact value of the benefit becomes known.
There is still a large amount of detail to be settled which will not be made clear until such time as the regulations are made. This will affect how the new arrangements work in practice. However, at a broad level, the following is an outline of ComSuper's present understanding of how the splitting arrangements will operate.
- This legislation is Commonwealth legislation and as such it only applies to legally married couples as de-facto relationships are dealt with under state and territory laws;
- Certain benefits will not be split, for example benefits released on hardship grounds and temporary disability or illness benefits;
- Spouse and childrens' benefits which become payable to a person who meets a scheme's eligibility requirements as a consequence of the death of a member or pensioner will be split in order to satisfy any agreements or orders made under the Family Law arrangements in favour of a previous spouse of the deceased member or pensioner - ie. a previous spouse's entitlement under the Family Law arrangements must be taken into account when establishing the benefit payable to a person who qualifies for a benefit under the scheme's governing rules;
- It is expected that the value of an interest in a defined benefit scheme will be determined actuarially, net of any surcharge liability i.e. any surcharge liability remains with the member. Following valuation parties may agree (or the court may order) a split, specifying a dollar value or a percentage of the member's benefit, for payment to a non-member spouse;
- Some schemes (including some ComSuper administered schemes) might be specified in the regulations as being percentage only interests - in other words, a set amount cannot be split, only a specified percentage. The benefit for the non-member spouse (note that a non-member spouse may in fact be a member of the same scheme in their own right) will accrue in a manner to be specified in the regulations until such time as the non-member spouse satisfies the SIS preservation standards and the benefit can be paid; and
- Trustees will be required to supply the same sort of information to the non-member spouse as they would be required to supply to the member spouse, eg. supply annual information statements, benefit estimates.
As mentioned earlier, the above outline is ComSuper's present understanding of how the new arrangements will operate. Any scheme members currently involved in Family Law divorce proceedings or property distributions should consult their legal advisors on any implications of the new arrangements in their particular circumstances. People who enter into property settlements before the new legislation comes into effect (or have previously entered into financial agreements under the Family Law Act) will not be covered by the legislation.
Further details of the new arrangements will be provided as they become available.
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