the Scheme to Split Superannuation

In his speech to the National Conference of Family Lawyers in March 2002, the Attorney-General described the scheme to split superannuation as complex. The following points describe the scheme in outline:

Coverage: The definition of "eligible superannuation plan" (section 90MD) provides wide coverage of all superannuation. It includes accumulation style superannuation, both fully and partially vested, defined benefit interests as well as a range of other superannuation products. These additional products include retirement savings accounts, approved deposit funds, small superannuation accounts, self managed superannuation funds, exempt public sector schemes and constitutionally protected funds. For completeness, judges' pensions and parliamentary pensions are also included.

Valuation: Valuation of superannuation is mandatory before the court makes a splitting order (section 90MT). In valuing the superannuation, the court must apply the methodology prescribed in the Family Law (Superannuation) Regulations 2001. This set of regulations provides seven methodologies for the valuation of superannuation:

• Accumulation interests - growth phase (regulation 31)
  
• Defined benefit interests paid as a pension - growth phase (regulation 29 and schedule 2)
  
• Defined benefit interests paid as a lump sum - growth phase (regulation 29 and schedule 2)
  
• Partially vested accumulation interests - growth phase (regulation 32 and schedule 3)
  
• Life pension (regulation 42 and schedule 4)
  
• Fixed term pension (regulation 42 and schedule 5)
  
• Fixed term pension with a future lump sum (residual capital value) - regulation 43 and schedule 6)

Orders: The court is provided with power to make new orders to split superannuation in the growth phase, the payment phase and for percentage only interests. In addition, the court is given further enforcement powers and the power to make an order to flag a superannuation interest.

Agreements: As an alternative to court orders, a couple are able to make a superannuation agreement. Anything that can be achieved by court order can be achieved by agreement. Once made, the agreement is to be served on the trustee for implementation. Four business days is provided. Courts are given a new range of enforcement powers in relation to superannuation agreements.

Payment splitting: Payment splitting can occur by order or agreement. Once made, the trustee is required to preserve the base amount allocated to the non-member spouse and adjust it independently of the member's interest. There is then a complex set of regulations governing the payment of the superannuation to the non-member spouse. In general, the payment to the non-member spouse is met out of lump sum but if there is any outstanding payment to be made, it is met out of ongoing pension payments.

Interest splitting: Interest splitting occurs for regulated superannuation funds in relation to accumulation interests in the growth phase or for allocated pensions. This occurs under the Superannuation Industry (Supervision) Regulations, not under the Family Law Act. Interest splitting requires the giving of a payment split notice and a choice of three options to be made - new interest, rollover or transfer, or lump sum payment.

There are, of course, many aspects of the new laws not touched upon in the above summary. For more details, become a supersplitting.com.au member. The new laws chart areas of constitutional law governing the heads of power to make laws with respect to marriage and matrimonial causes. The new laws for the first time give the court express power to bind third party trustees but also extend the range of constitutional powers relied upon to include the corporations and pensions powers. There are provisions relating to information provision as well as the death of the non-member spouse. The new laws also make provision for subsequent marriages as well as tax and preservation of superannuation.