EXPLANATORY STATEMENT

 

Select Legislative Instrument 2010 No. 98

 

ISSUED BY THE AUTHORITY OF THE ATTORNEY-GENERAL

 

FAMILY LAW ACT 1975

 

FAMILY LAW (SUPERANNUATION) AMENDMENT REGULATIONS 2010 (No. 1)

 

Subsection 125(1) of the Family Law Act 1975 (FLA) provides, in part, that the

Governor-General may make regulations, not inconsistent with the FLA, prescribing all matters required or permitted by the FLA to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the FLA.

 

Part VIIIB of the FLA provides for the division of superannuation between married and de facto couples on relationship breakdown.

 

The Family Law (Superannuation) Regulations 2001 (the Principal Regulations) contain much of the detail of the legislative scheme for the division of superannuation on relationship breakdown, including the identification of persons as trustees of particular superannuation plans and provisions relating to the valuing superannuation.

 

The Regulations amend the Principal Regulations to identify the Secretary

of the Department of Finance and Deregulation, in place of the Secretary of the

Attorney-General’s Department, as trustee for the purposes of Part VIIIB of the FLA in relation to particular members of the pension scheme under the Judges’ Pensions Act 1968. The amendment reflects the transfer of responsibility for that Act from the Attorney-General to the Minister for Finance and Deregulation.

 

The Regulations also amend the Principal Regulations to replace the methods for valuing the non-member spouse’s entitlement when superannuation payable under a percentage-only interest in a superannuation fund or an approved deposit fund has been divided under Part VIIIB of the FLA. Superannuation payments under a percentage‑only interest can only be divided by a court order or an agreement under FLA Part VIIIB by reference to a percentage of each payment.

 

The Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.

 

Details of the Regulations are as follows:

Regulation 1 – Name of Regulations

Regulation 1 provides that the name of the Regulations is the Family Law (Superannuation) Amendment Regulations 2010 (No. 1).

Regulation 2 – Commencement

Regulation 2 provides for the Regulations to commence on the day after they are registered on the Federal Register of Legislative Instruments.

Regulation 3 – Amendment of the Family Law (Superannuation) Regulations 2001

Regulation 3 provides that the Family Law (Superannuation) Regulations 2001 (the Principal Regulations) are amended as set out in Schedule 1.

Schedule 1 – Amendments

Item [1]: Paragraph 10(2)(a)

Item 1 amends paragraph 10(2)(b) of the Principal Regulations to identify the Secretary of the Department of Finance and Deregulation as the trustee, for the purposes of Part VIIIB of the Family Law Act 1975 (FLA), of the pension scheme under the Judges’ Pensions Act 1968 (the Judges’ Pensions Act scheme) in relation to particular members of that scheme.

Those members are Judges and former Judges (and their spouses) with pension entitlements under the Judges’ Pensions Act scheme, other than a Judge or former Judge who is the President or a former President of Fair Work Australia (FWA), a Deputy President or a former Deputy President of FWA who was a Presidential Member of the Australian Industrial Relations Commission (AIRC) or a former Presidential Member of the AIRC.

Item [2]: Subregulation 14N(7)

Item 2 amends subregulation 14N(7) of the Principal Regulations consequential on the amendments made by item 4. New subregulation 14N(7) provides that the methods for valuing the non‑member spouse’s entitlement, when superannuation payable under a percentage‑only interest has been divided under Part VIIIB of the FLA, are set out, depending on the way in which that superannuation has been divided, in either Part 2 or Part 3 of Schedule 1A. Former subregulation 14N(7) referred only to Schedule 1A to the Principal Regulations.

Item [3]: heading

Item 3 amends the heading to Schedule 1A to the Principal Regulations so that the heading only refers to superannuation interests covered by the Schedule, namely any superannuation interest that is a percentage-only interest in a superannuation fund or an approved deposit fund.

Item [4]: Schedule 1A, clauses 1 and 2

Item 4 replaces former clauses 1 and 2 of Schedule 1A to the Principal Regulations with new clauses 1 to 4 of Schedule 1A.

 

 

New clauses 1 to 4 of Schedule 1A replace the methods for calculating the value of the non-member spouse’s entitlement when a court order or agreement under Part VIIIB of the FLA has been made to divide superannuation payable under a percentage-only interest in a superannuation fund or an approved deposit fund.

The value of the entitlement is relevant if the obligation under the court order or agreement to divide future superannuation payments at the time they are made by the fund – in the normal course of events, when the member spouse retires – is replaced by a split of the member spouse’s interest under the governing rules of the fund. When the interest is split, the Principal Regulations require that the value of any new interest created for the non-member spouse, or the amount rolled out for that spouse to another fund, is at least the value of his or her entitlement under the order or agreement.

Orders and agreements can divide superannuation payable under a percentage-only interest in a superannuation fund or an approved deposit fund in one of two ways.

While the methods in former subclauses 2(1) and 2(2) of Schedule 1A correctly valued the non-member spouse’s entitlement where the order or agreement will divide superannuation in one of those two ways, they would, in most cases, have undervalued the entitlement if the order or agreement will divide superannuation in the other way.

New clause 3 of Schedule 1A provides methods for valuing the non-member spouse’s entitlement under a court order or agreement dividing superannuation payments that will give that spouse the portion of each payment calculated by applying the percentage specified in the order or agreement to that payment. The methods in new clause 3 replace the methods in former subclauses 2(1) and 2(2) of the Principal Regulations in relation to court orders or agreements which divide superannuation in this way. Non-member spouses are not disadvantaged. The governing rules of only three of the seven funds in which interests have been prescribed as percentage-only have interest splitting provisions, and interest splitting has yet to occur under those rules in those three funds.

The methods in new clause 4 of Schedule 1A confine the methods in former subclauses 2(1) and 2(2) of the Schedule for valuing the non-member spouse’s entitlement to where the court order or agreement dividing superannuation payments will give that spouse a portion of each payment calculated in accordance with the Principal Regulations. While orders or agreements dividing superannuation payments in this way specify a percentage, where the order or agreement is made at a time when superannuation entitlements under the fund are still accruing, regulations 19 and 26 of the Principal Regulations provide for the non-member spouse to obtain a proportionally reduced share of each superannuation payment.

New clauses 1 and 2 of Schedule 1A re-draw particular aspects of former clauses 1 and 2 of the Schedule, to reflect current Commonwealth drafting style. For example, clause 2 groups the definitions of the various factors used in the formulas for the methods set out in new clauses 3 and 4 in alphabetical order in a separate definition clause.

Item [5]: Schedule 1A, clause 3

Item 5 renumbers former clause 3 of Schedule 1A as clause 5, consequential on the insertion of new clauses 3 and 4 by item 4.

Consultation on the content of the Regulations was undertaken under section 17 of the Legislative Instruments Act 2003 with the Department of Finance and Deregulation, the Australian Government Actuary’s office, the Queensland Government Superannuation Office, the New South Wales Department of Premier and Cabinet, the Tasmanian Department of Treasury and Finance and the South Australian Department of Treasury and Finance. The consultation occurred by way of discussions and correspondence.