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July 6, 2016 By Louise Mathias

8 Tips To Increase Your Superannuation Knowledge In Family Law Cases

57349710 - different direction concept with question mark signs and road splitting into two under dull and bright skies. 3d renderingSuperannuation can be complex or relatively straightforward.  Before practitioners provide advice, draft orders or superannuation agreements they need to have a basic understanding of superannuation and how to determine superannuation interest/s for their clients.  What is a superannuation fund? What is a splitting order and a flagging order? What are some practical tips in respect to superannuation in family law property proceedings?

This is a short summary to assist practitioners gain a basic understanding of superannuation, the information includes:

  1.    Basic Legal Concepts

Should superannuation be treated as”property” or “another species of asset different from property as defined in s 4”  and therefore not property for the purposes of  s 79 Family Law Act 1975 (Cth) (“FLA”)?

Section 90MC Family Law Act 1975 (Cth) (“FLA“) provides that, “A superannuation interest is to be treated as property for the purposes of paragraph (ca) of the definition of matrimonial cause in s 4 Family Law Act,

Section 90MB FLA, provides that the FLA takes effect notwithstanding anything to the contrary contained in any other law of the Commonwealth, any state or territory law or anything contained in any trust deed or instrument.

Pt VIIIB FLA is,  as a general rule, designed to catch all superannuation schemes. Conversely, the schemes or interests which are not caught will be rare.

Part VIIIB  FLA must be read in conjunction with the Family Law (Superannuation) Regulations 2001 (“Super Regulations”). Many crucial matters are contained in the Super Regulations, including important definitions and provisions for attributing amounts to superannuation interests.

In s 79 proceedings, the court may make orders “in relation to the superannuation interests of the spouses“- s 90MS FLA.

The process for dealing with both superannuation interests and property remains governed by s 79 FLA.

2     Relevant Case

The Full Court decision in In the Marriage of Coghlan (2005) 33 FamLR 414; (2005) FLC 93-220; [2005] FamCA 42 it was held, by majority, that superannuation interests are not “synonymous with property for the purposes of proceedings under s 79” but, rather, are “another species of asset which is different from property as defined in s 4(1)”. Accordingly, that later Full Court held that superannuation interests are not “to be treated as property in proceedings under s 79 (irrespective of whether or not an order under Part VIIIB is sought in those proceedings)”. The majority, referring to the principle in Nguyen v Nguyen (1990) 169 CLR 245 This case specifically departed from the earlier decision in Hickey. There were strong dissenting judgments from Justices O’Ryan and Warnick.

3.     What Is a Superannuation Fund?

A superannuation fund is a particular form of trust, with resultant trustee obligations.

4.    What Are Some Of The Different Types of “Super” Funds?

  • Accumulation Fund/Defined Accumulation Fund.  Accumulation of superannuation contributions and the earnings during the member’s membership of the fund
  • Defined Benefit Fund – benefit defined in fund deed. Entitlements will depend on the fund’s investment performance. Not as popular as the Accumulation Fund.
  • Self Managed Super Fund (SMSF) – defined in the Superannuation Industry (Supervision) Act 1993
  • Retirement savings accounts (RSAs) are superannuation schemes established under the Retirement Savings Account Act 1997 (Cth)

5.   The Superannuation Life-Cycle

  1. the growth phase;
  2. the payment phase;
  3. death benefits.

6.     What Is A Splitting Order? (s90MD FLA)

A splitting order is an order that a superannuation interest be split between spouses when the payment becomes payable. There are 3 types of splitting orders:

  1. An order splitting the payments by a specified amount
  2. An order splitting the payments by a  specified percentage
  3. An order relating to percentage only interests.

If a splitting order is sought or might be ordered by the court, there will be an obligation to provide evidence of the amount of the superannuation interest/s, the type of fund involved and the statutory method of arriving at the amount of the interest has been used.

7.  What Is a Flagging Order? (s90MU FLA)

A flagging order is an order prohibiting trustees from making payments pursuant to a superannuation interest without leave of the court. The effect of the order is to defer the issues of valuation and splitting of the interest until a later date

8.  Practical Superannuation Tips

Whether the superannuation is “treated as property” as the Full Court held in Hickey or is “another species of asset” as the Full Court held in Coghlan, the s 79 FLA process will involve:

  1. ascertaining the assets of the parties and each of them and the value of those assets; and
  2. ascertaining the amount of the superannuation interest/s involved.

Before the second exercise can be performed it will be necessary to take  further steps:

  1. Identify precisely the nature of the superannuation interest under consideration;
  2. Identify the phase (eg growth or payment) that the interest is in;
  3. Identify the consequent statutory methodology for arriving at the amount of that interest; and
  4. Arrive at the amount of the interest/s by using the methodology prescribed in the Regulations, by an approved, scheme-specific methodology or, where no splitting order is sought, by another method (the member statement should contain the information needed readily to arrive at the amount of the interest)
  5. Section 90MZD FLA provides that an order under Pt VIIIB in relation to a superannuation interest may be expressed to bind the trustee. However, that cannot occur “unless the trustee has been accorded procedural fairness”. The Act does not define “procedural fairness”.A trustee would need to have notice of any such intended orders and have the opportunity to be heard in respect same.
  6. Satisfy yourself of all of the matters required by the legislation and carry out the multi-step process referred to.

If you are in need of a barrister & mediator who provides quality and reliable services in Family Law; children (IVF & Surrogacy included) and property proceedings, contact Louise on (02) 9336 5399 or louise.mathias@sydneybarrister.net.au

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Filed Under: Blog, Family Law (Parenting and Property), Mediation Tagged With: family law, family law barrister, flagging order, property proceedings, s79 family law act, splitting order, superannuation, tips

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