SUPERANNUATION is now on the table in divorce proceedings following changes to the Family Law Act. The amendments, which took effect on December 28 last year, mean superannuation, previously out of reach for would-be divorcees, is now counted alongside bricks and mortar assets in the event of marriage breakdown.
The Family Court may consider breaking up superannuation interests held by the two marriage partners in the same way as other assets.
Women, who in the past were often left short-changed, stand to gain the most through the changes as the majority of the estimated $530 billion tied up in superannuation in this country is held by men.
The superannuation industry has embraced the changes despite the increased paperwork the amendments bring.
Superannuation Funds of Australia policy and research director Michaela Anderson said the reform was overdue, given the growth in superannuation funds and the social demands for the changes.
“We welcome it as an excellent initiative and well overdue,” she said.
“But we recognise that it will increase our workload.”
The Australian Institute of Superannuation Trustees also publicly welcomed the reform, saying it corrects a historic imbalance in situations where a divorce would leave women with a family home potentially valued in the hundreds of thousands of dollars, while men could walk away with millions tied up in superannuation.
Attorney General Daryl Williams agreed the reforms were long overdue.
“This approach reflects the Howard Government’s commitment to helping people resolve their legal problems wherever possible without going to court,” Mr Williams said.
The new laws are complemented by the new Family Law [Superannuation] Regulations and by amendments to the Superannuation Industry [Superannuation] Regulations.
“The regulations will ensure that superannuation interests are more accurately valued and, in most cases, non-member spouses are able, instead of sharing future payments, to have a share of superannuation in their own name.”
Divorce Law specialist and former WA Premier Peter Dowding said the laws provided a more equitable solution to separating partners, and that neither party would be disadvantaged by the new laws.
He said it would provide a better balance between liquid and illiquid assets being shared around. Under the previous regime women would traditionally receive the liquid assets while men would be left with the superannuation, which could not be touched until retirement.
“It probably doesn’t disadvantage either party,” Mr Dowding said.
Divorcing couples can divide future superannuation payments by agreement and avoid protracted litigation or obtain a court order.
The superannuation splitting laws are part of the existing property settlement regime. This means that all superannuation is taken into account, regardless of when it was acquired. There is no automatic 50/50 division of superannuation interests and the Family Law Court will have broad discretionary powers.
Courts will first need to determine the value of the superannuation and then allocate an amount of that money to the non-member spouse.
The valuation depends on the type of interest and whether it is still in the growth phases or the payment phase. Once achieved using different formula, a ‘base amount’ is allocated to the non-member spouse.
Transfers can then occur either through payment splitting under the Family Law Act and regulations or interest splitting under the superannuation industry (supervision) regulations. The court can also place a flag on payments, preventing the trustee from paying out superannuation until the flag is lifted.
De facto couples are excluded from the new laws because property settlement rights pertaining to de facto couples are governed by State, not Federal, laws. For this to occur the State will have to refer the law making power of de facto couples to the Commonwealth.
The Australian Taxation Office has issued three draft taxation determinations that applies the new laws and how it will tax the split superannution.
It applies to all types of superannuation funds, such as company funds, industry funds, public service schemes, retail funds, politicians’ schemes, and judges’ schemes.
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