FAMILY LAW LEGISLATION AMENDMENT (SUPERANNUATION) BILL 2000 Explanatory Memorandum

FAMILY LAW LEGISLATION AMENDMENT (SUPERANNUATION) BILL 2000

1998-1999-2000-2001







THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA









HOUSE OF REPRESENTATIVES











FAMILY LAW LEGISLATION AMENDMENT (SUPERANNUATION) BILL 2000











SUPPLEMENTARY EXPLANATORY MEMORANDUM







Amendments to be moved on behalf of the Government







(Circulated by authority of the Attorney-General,

the Honourable Daryl Williams AM QC MP)

ISBN: 0642 457913

TABLE OF CONTENTS

Page



Outline of Amendments 1



Financial Impact Statement 2



Notes on Amendments 3

AMENDMENTS OF THE FAMILY LAW LEGISLATION AMENDMENT (SUPERANNUATION) BILL 2000

OUTLINE OF AMENDMENTS

The Family Law Amendment (Superannuation) Bill 2000 (“the Bill”) will amend the Family Law Act 1975 (“the Family Law Act”) to give effect to the Government’s commitment to enable the division of superannuation on marriage breakdown.

The Government amendments to the Bill respond to issues raised, both before the Senate Select Committee on Superannuation and Financial Services and during consultations with the superannuation industry and other interested groups, that amendments were needed to more clearly reflect the policy intention. In addition there are a number of minor and technical amendments.

The objectives of the Bill are set out in the Explanatory Memorandum to the Bill introduced into the House of Representatives on 13 April 2000.

In general terms, the Bill provides that parties will be able to divide superannuation either in its accumulation phase or its payment phase by agreement or where the parties are unable to agree, by court order.

The following Government amendments to the Bill are proposed to:

• ensure that in cases where a property order has been set aside, or approval of a maintenance order revoked, the new regime will apply;

• tie the commencement of the new regime more closely to the finalisation of the complementary Family Law Amendment Regulations and the Superannuation Industry (Supervision) Amendment Regulations and enable the superannuation industry to confidently make the necessary changes to their administrative and information technology systems;

• allow for the court to have a discretion, in prescribed circumstances, to depart from the prescribed method of actuarially valuing a superannuation interest;

• allow superannuation trustees to charge reasonable fees;

• provide for the circumstance where a person is not the trustee of an eligible superannuation plan but has the power to make payments to members of the plan;

• strengthen the privacy protections when a spouse applies for information about the member’s superannuation interest by providing that the trustee is guilty of an offence if they provide any address of the member or if they inform the member that the application has been made;

• clarify that if a bulk transfer of superannuation interests to another fund occurs, this will trigger a payment split if one of the superannuation interests that is transferred is the subject of a payment split;

• clarify the methods by which a payment split can occur and distinguish more clearly between the valuation of a superannuation interest and the splitting of the interest;

• provide for certain interests to be prescribed as “percentage-only” interests, which will mean that they are divided by reference only to a percentage, which will be applied either to the whole or a proportion of all splittable payments;

• provide that, for funds which are not self-managed, the operative time for a payment flag mirrors the operative time for a payment split;

• clarify the enforcement of court orders provision in order that it incorporate a similar provision to one in Part VIIIA of the Act;

• provide the court with greater discretion when deciding whether or not to make an order that the superannuation interest is to be flagged;

• extend the regulation making power concerning the preservation of a non-member spouse’s entitlement under a payment split to a split of an interest in an approved deposit fund;

• extend the operation of other laws and instruments providing for the preservation of a non-member spouse’s entitlement under a payment split to a split of an interest in an exempt public sector superannuation scheme;

• enable regulations to be made about the information that a trustee has to provide to a non-member spouse about the member spouse’s superannuation interest;

• provide an offence where trustees terminate an employee’s employment on the grounds that a payment flag, a splitting agreement or a splitting order is in force;

• clarify that the non-member spouse will have appropriate access to the Superannuation Complaints Tribunal; and

• make a number of necessary technical and drafting amendments.

FINANCIAL IMPACT STATEMENT

The proposed amendments do not have any financial impact.

NOTES ON AMENDMENTS

AMENDMENTS TO THE BILL

Amendment 1 - Commencement

1. Amendment 1 will omit existing Clause 2 of the Bill, which provides for the commencement of the Act, and substitute new Clause 2.

2. Existing Clause 2 of the Bill currently provides that Act commences on the day on which it receives Royal Assent and that Schedule 1 to the Bill, which contains the substantive superannuation amendments, commences one year after Royal Assent.

3. The policy intention is to ensure that the superannuation industry has sufficient time to make the necessary changes to both administrative and information technology systems.

4. Concern has been expressed that the detail of the new regime is contained in the Family Law Amendment Regulations and the Superannuation Industry (Superannuation) Amendment Regulations and that, therefore, the commencement of the new regime should be more closely tied to the commencement of the Regulations – rather than the commencement of the Bill.

5. Amendment 1 will effectively provide that the new regime commences on Proclamation, with a fail safe clause if proclamation is not made within 18 months. This will enable the commencement time to be proclaimed following the making of the necessary regulations.

Amendment 2 – Schedule(s)

6. Amendment 2 will amend Clause 3 of the Bill, which provides for the effect of the Schedule(s) to the Bill.

7. This is a drafting amendment, consequent on Amendment 1.

Amendment 3 - Definitions

8. Amendment 3 will amend Clause 4 of the Bill, which provides the necessary definitions.

9. This amendment will insert definitions of the terms “section 79 order” and “section 87 agreement”, which are used in new Clause 5 of the Bill, which will be inserted by Amendment 4.

Amendment 4 – Application of superannuation amendments

10. Amendment 4 will omit Clause 5, which provides for the application of the superannuation amendments, and substitute new Clause 5.

11. The current application provision provides that the new arrangements for the division of a superannuation interest do not apply to a marriage where a property settlement has been finalised – by either a final section 79 order or an approved section 87 agreement.

12. However, this is not appropriate in circumstances where a section 79 order has been set aside by the court. Similarly it is not appropriate where approval of a section 87 agreement has been revoked by the court for reasons other than that the parties to the agreement want the approval to be revoked. In such situations, the legal situation of the parties is as if the section 79 order had never been made or the section 87 agreement never been approved. Therefore, the new regime about the division of superannuation interests should apply.

13. Amendment 4 will amend the Bill to provide that where a section 79 order has been set aside or approval of a section 87 agreement has been revoked, other than merely because the parties desire it, the superannuation amendments will apply.

AMENDMENTS TO SCHEDULE 1 TO THE BILL

Amendments 5 and 6 – Section 90K – setting aside an agreement

14. Amendments 5 and 6 are drafting amendments, consequent on the commencement of the Family Law Amendment Act 2000.

Amendment 7 – Section 90MB – overriding other laws etc

15. Amendment 7 will amend section 90MB, which is inserted by the Bill, that provides, effectively, that Part VIIIB overrides other laws, trust deeds and other instruments.

16. The policy intention is that Part VIIIB should apply despite other laws and instruments in order that the division of superannuation interests on marriage breakdown is effective.

17. It is necessary, therefore, to provide that Part VIIIB overrides all other laws and instruments – both those made prior to the commencement of Part VIIIB and those made subsequent to its commencement.

18. Amendment 7 will effect this by substituting existing subsection 90MB(1) with new subsection 90MB(1), which provides that Part VIIIB has effect despite anything to the contrary in any of the listed statutes of instruments, whether made before or after the commencement of Part VIIIB.

Amendment 8 – Section 90MD - definitions

19. Amendment 8 will insert a definition of “approved deposit fund” into section 90MD, which provides the definitions used in new Part VIIIB of the Family Law Act being inserted by the Bill. The term “approved deposit fund” will be used in section 90MZ, which provides for the preservation of superannuation interests.

Amendment 9 – Section 90MD - definitions

20. Amendment 9 will omit the definition of “breakdown declaration” from section 90MD, which provides the definitions used in new Part VIIIB of the Family Law Act being inserted by the Bill.

21. This is because the concept of a “breakdown declaration” will be, by Amendment 13, replaced by the concept of a “separation declaration”.

22. The reason for this is that the term “breakdown” is not currently used in the Family Law Act and is difficult to precisely define. The term “separation” is used in the Family Law Act and its meaning is well understood.

Amendment 10 – Section 90MD - definitions

23. Amendment 10 will insert a definition of “business day” into section 90MD, which provides the definitions used in Part VIIIB of the Family Law Act being inserted by the Bill.

24. This new definition will replace the existing definition of “working day”, which will be omitted by Amendment 14.

25. Concern was expressed by the superannuation industry that the definition of “working day” differed from the definition of “business day” in the Superannuation Industry (Supervision) Act 1993 (‘SIS Act’). Amendment 10 will ensure that the definition contained in Part VIIIB of the Family Law Act mirrors the definition in the SIS Act.

Amendment 11 – Section 90MD - definitions

26. Amendment 11 will amend the definition of “eligible superannuation plan” by removing the reference to “within the meaning of the SIS Act” from the definition of “approved deposit fund”.

27. This is a drafting amendment, consequent on Amendments 8 and 32 (number will change because of insertion of new amendment 14(b)).

Amendment 12 – Section 90MD - definitions

28. Amendment 12 will insert a definition of “percentage-only interest” into section 90MD, which provides the definitions used in new Part VIIIB of the Family Law Act being inserted by the Bill.

29. Amendment 12 will provide that a “percentage-only interest” means a superannuation interest prescribed by the regulations for the purposes of the definition.

30. The policy intention is that the interests that will be prescribed to be “percentage-only interests” will be interests for which, because of extremely significant “cliff vesting”, the only appropriate and equitable method of splitting them is by specifying a percentage, rather than a value, split (see Amendment 17 – number will change because of new 14(b)).

Amendment 13 – Section 90MD - definitions

31. Amendment 13 will insert a definition of “secondary government trustee” in section 90MD, which provides the definitions used in Part VIIIB of the Family Law Act being inserted by the Bill.

32. For some eligible superannuation plans, the person who is the trustee is not necessarily the person who makes payments to members of the plan. The superannuation scheme created pursuant to the Military Superannuation and Benefits Act 1991 is an example of such a scheme. This is explained in more detail in the notes to Amendment 15.

33. The policy intention is that where a person who is not the trustee of an eligible superannuation plan nevertheless has the power to make payments to members of the plan then, in certain circumstances, that person is to be taken to be a trustee. This is necessary, for example, when the member is in receipt of pension payments pursuant to the superannuation plan. It is obviously essential that any agreement or order to divide the superannuation interest be served on the person who is making the payments to the member rather than the person who is the trustee under the current definition in section 90MDA.

34. “Secondary government trustee” will be defined to mean a trustee that is the Commonwealth, a State or a Territory and is a trustee only because of the operation of section 90MDA, which will be amended to extend the meaning of “trustee”.

35. Amendment 13 will also insert a definition of “separation declaration” in section 90MD, which provides the definitions used in Part VIIIB of the Family Law Act being inserted by the Bill.

36. The definition of “separation declaration” is in identical terms to the definition of “breakdown definition” currently included in section 90MD of the Bill.

37. The reason for this is explained in the notes on Amendment 9.

Amendment 14 – Section 90MD - definitions

36. Amendment 14 will omit the definition of “working day” in section 90MD, which provides the definitions used in Part VIIIB of the Family Law Act being inserted by the Bill.

37. The reason for this is explained in the notes on Amendment 10.

Amendment 15 – Section 90MDA - trustee

38. Amendment 15 will insert new section 90MDA.

39. Section 90MDA of the Bill provides a definition of “trustee” for the purposes of new Part VIIIB of the Family Law Act.

40. A trustee is defined to be a trustee, in the normal use of that term, or a person prescribed to be a trustee or a person who manages the eligible superannuation plan.

41. For most eligible superannuation plans, the trustee will both administer the plan and be responsible for making payments to a member in respect of an interest in that eligible superannuation plan.

42. However, in some eligible superannuation plans, the person who is the “trustee”, in the sense of being the person who “manages” the plan, will not be the same as the person who has the power to make payments to members of the plan.

43. An example of this situation is the superannuation interest provided by the MSB scheme under the Military Superannuation and Benefits Act 1991 (‘MSB Act’). Under the MSB Act, the trustee for the purposes of new Part VIIIB of the Family Law Act will be the MSB Board but any benefits payable to members of the MSB Scheme are paid by the Commonwealth from consolidated revenue funds as required by the MSB Act.

44. It is therefore necessary to provide that in such situations, the person who has a power to make payments to members of the plan should be taken to be the trustee of the plan for the purposes of Part VIIIB of the Family Law Act.

45. New Section 90MDA will provide that if a person who is not the trustee of an eligible superannuation plan nevertheless has the power to make payments to members of the plan, then references in Part VIIB to the trustee of the plan include references to that person.

Amendment 16 – Section 90ME – splittable payments

46. Amendment 16 will insert new subsection 90ME(3).

47. The Bill provides for a payment splitting regime and generally provides that when a splittable payment becomes payable then part of the splittable payment is to be paid, in accordance with an agreement or an order, to the non-member spouse and the remainder is to be paid to the member spouse. Section 90ME provides for the types of payments that are to be splittable payments.

48. Paragraph 90ME(1)(b) provides that a payment to another person for the benefit of the spouse is a splittable payment. This means, for example, that when a superannuation interest is “rolled over” to another fund, this will be a splittable payment and will therefore be subject to any payment splitting agreement or order that is in effect on the interest.

49. The policy intention is that all “roll overs” to another fund, in whatever circumstances, will be splittable payments. However, there appears to be uncertainty as to whether under the current Bill, “bulk transfers” of members, that is where a payment is made to another person for the benefit of more than 1 person, would be covered by the current provision in paragraph 90ME(1)(b). This may occur in situations where smaller plans are transferred into a master trust.

50. New subsection 90ME(3) will clarify this and provide that if a payment is made to another person for the benefit of 2 or more persons who include the spouse, then the payment, to the extent that it is paid for the benefit of the spouse, is a splittable payment.

Amendment 17 – Section 90MI – operative time for payment split

51. Amendment 17 will omit existing section 90MI of the Bill, which provides for the operative time for payment split, and substitute new section 90MI.

52. The Bill provides that the payment split, under an agreement, begins to apply at the “operative time”.

53. Section 90MI effectively provides for the operative time to be 4 days after a copy of the agreement has been served on the trustee. It also provides that the copy of the agreement must be accompanied by certain documents.

54. Amendment 17 will insert, in new paragraph 90MI(b), a requirement that, in certain circumstances, an additional document must accompany the copy of the agreement that is served on the trustee.

55. This aspect of Amendment 17 is consequential on Amendment 18.

56. Amendment 17 will also insert a note to section 90MI about the base amount, in identical terms as the other notes that explain the concept of “base amount” in those provisions where the concept is used.

Amendment 18 – Section 90MJ – payment split

57. Amendment 18 will omit existing section 90MJ and substitute new section 90MJ.

58. Section 90MJ of the Bill provides for a payment split under a superannuation agreement or a flag lifting agreement.

59. The policy intention is that the provisions about a payment split under a superannuation agreement or a flag lifting agreement should mirror, to the extent possible, the provisions about a payment split by court order. In addition, during consultations on the Bill, and the development of the draft Family Law Amendment Regulations, it became apparent that section 90MJ conflates, and confuses, two issues – the method of valuation of a superannuation interest and the method of splitting a superannuation interest.

60. Amendment 18 will clarify this and provide that section 90MJ provides for the method of splitting a superannuation interest and not conflate the valuation method with the splitting method.

61. Amendment 18 will provide, under new paragraphs 90MJ(1)(b) and (c), for the new splitting methods available.

62. New paragraph 90MJ(1)(b) will provide that if the superannuation interest is a “percentage-only interest” (as provided for in Amendment 12 ), then the superannuation agreement or flag lifting agreement will do one of two things.

63. As outlined above, it is intended that the interests that will be prescribed to be “percentage-only interests” will be interests for which the only equitable and appropriate method of splitting them is by specifying a percentage, rather than a value, split.

64. It is envisaged that the superannuation interests that will be prescribed will be those under which the benefits provided have extremely significant “cliff vesting” – that is that the amount of the benefits increases exponentially on the occurrence of a specified event.

65. An example of such an interest is the superannuation interest provided for by the Judges’ Pensions Act 1968 (‘the Judges’ Pensions Act’), which generally covers judges appointed to federal courts.

66. The Judges’ Pensions Act generally provides that a judge is entitled to be paid a pension only if he or she has attained the age of 60 years and has served for 10 years. If a judge does not satisfy these preconditions, no pension is payable. On satisfying these preconditions, a judge is entitled, under the Judges’ Pensions Act, to an annual pension of 60% of the appropriate current salary. Similar schemes cover judges in other jurisdictions. Also, benefits payable under the superannuation schemes for Commonwealth, State and Territory members of parliament have extremely significant “cliff vesting”.

67. For these types of benefits, it is not possible to appropriately actuarially value the superannuation interest and, therefore, it is more equitable to divide them by specifying a percentage split rather attempt to actuarially calculate a dollar value of the interest.

68. In some circumstances it may be appropriate to apply a specified percentage to a portion of the pension entitlement, payable under the percentage-only interest, for example where the member of the superannuation plan has acquired significant value after the marriage breakdown it may not be just and equitable for the non-member spouse to receive a specified percentage of the entire value of each of the splittable payments paid pursuant to the increased interest.

69. For example, a parliamentarian may separate prior to having served 8 years in Parliament, and therefore prior to being entitled to a parliamentary pension, but continue to serve in Parliament for a number of years, including some as a Minister. When that member retires, they will be entitled to a pension based on their years, and experience, of service, including many years after separation. In such circumstances, it may not be just and equitable for the member’s former spouse to receive a specified percentage of the entire pension entitlement. It may be more appropriate that the member’s former spouse receive, pursuant to an agreement or court order, a specified percentage of a proportion of the member’s pension entitlement.

70. New paragraph 90MJ(1)(b) will provide that if the interest is a percentage-only interest, then the agreement must do one of the options provided for in new subparagraphs 90MJ(1)(b)(i) and (ii).

71. New subparagraph 90MJ(1)(b)(i) will provide that the agreement is to specify a percentage that is to apply for the purposes of the sub-paragraph.

72. The effect of such an agreement will be that the specified percentage will apply to a proportion of the benefit payable pursuant to the percentage-only interest, with the relevant proportion being calculated in accordance with the regulations.

73. In other circumstances, it may be appropriate for an agreement to provide that the specified percentage is to apply to all splittable payments in respect of the percentage-only interest. New subparagraph 90MJ(1)(b)(ii) will provide for this option.

74. New paragraph 90MJ(1)(c) will provide if the interest is a not percentage-only interest, then the agreement must specify one of the following:

• a base amount in relation to the interest (90MJ(1)(c)(i));

• a method by which such a base amount can be calculated at the time when the agreement is served on the trustee (90MJ(1)(c)(ii)); or

• a percentage that is to apply to all splittable payments in respect of the interest.

75. New paragraphs 90MJ(d) and (e) are in identical terms to those in existing paragraphs 90MJ(c) and (d).

76. New subsections 90MJ(2) and (3) are in identical terms to those in existing subsections 90MJ(2) and (3).

77. New subsection 90MJ(4) will provide for the methods by which the amount to be payable to the non-member spouse is to be calculated.

78. New paragraph 90MJ(4)(a) will provide that if the agreement specifies a percentage, as specified in subparagraph (1)(b)(ii) or subparagraph (1)(c)(ii), then the amount is calculated by applying the specified percentage to the splittable payment.

79. New paragraph 90MJ(4)(b) will provide that if the agreement doesn’t specify a percentage, then the amount payable to the non-member spouse is to be calculated in accordance with the regulations.

80. New subsection 90MJ(5) is in identical terms to existing subsection 90MJ(5).

Amendment 19 – Section 90MK – operative time for payment flag

81. Amendment 19 will omit existing section 90MK, which provides for the operative time for a payment flag, and substitute new section 90MK.

82. Existing section 90MK effectively provides that the operative time for a payment flag under a superannuation agreement is when the agreement, together with the prescribed accompanying documents, is served on the trustee.

83. For larger superannuation funds, their administrative systems may mean that there is a delay between the service time and the time when the paperwork can be processed. For instance, if the papers are served on the trustee but the fund is managed by some other organisation it will be necessary for the trustee to forward the paperwork to the fund administrator.

84. New section 90MK will provide that, for other than self-managed superannuation funds, the operative time will be the fourth business day after the service time. This will bring the operative time for a payment flag by agreement in line with the operative time for a payment split by agreement (see section 90MI).

Amendment 20 – Section 90MN – flag lifting agreement etc.

85. Amendment 20 will omit existing paragraph 90MN(1)(b) and substitute new paragraph 90MN(1)(b).

86. This is a technical amendment, consequent on Amendment 18.

Amendment 21 – Section 90MN – flag lifting agreement etc.

87. Amendment 21 is a drafting amendment, consequent on the commencement of the Family Law Amendment Act 2000.

Amendments 22 and 23 – Section 90MP – separation declaration

88. These amendments are drafting amendments, consequent on Amendments 9 and 13.

Amendment 24 – Section 90MR – enforcement by court order

89. Amendment 24 will omit existing section 90MR and substitute new section 90MR.

90. New subsection 90MR(1) is in identical terms to existing section 90MR.

91. The Family Law Amendment Act 2000 inserted section 90KA into the Family Law Act, which provides for the enforceability, validity and effect of financial agreements. It is necessary to ensure that the provisions about the enforcement of superannuation agreements are in similar terms to those about the enforcement of financial agreements.

92. New subsections 90MR(2) and (3) replicates, though utilising different drafting techniques, the enforcement provisions in section 90KA.

Amendment 25 – Section 90MS – orders under section 79

93. Amendment 25 will omit the existing note to subsection 90MS(1) and substitute two notes.

94. New note 1 will clarify the relationship between section 79 and Division 3 of Part VIIIB. It is intended to allay concerns expressed about this issue.

95. New note 2 is in identical terms to the existing note.

Amendment 26 – Section 90MT – splitting order

96. Amendment 26 will omit existing section 90MT and substitute new section 90MT.

97. Existing section 90MT doesn’t provide for the court to make any order other than an order that in effect specifies an amount to be paid to the non-member spouse. It is the policy intention that, particularly for percentage-only interests but also for other types of interests, the court should be able to make an order that specifies a percentage of the whole or a portion of the splittable payment is be paid to the non-member spouse. The amendment to section 90MT will rectify this.

98. New paragraph 90MT(1)(a) is in identical terms to existing paragraph 90MT(1)(a) except that it is expressed to apply only if the interest is not a percentage-only interest.

99. New paragraph 90MT(1)(b) will provide for the court to make a splitting order that specifies a percentage to be paid to the non-member spouse. Such an order will have the effect that the non-member spouse is entitled to be paid a specified percentage of the splittable payment and for the member’s entitlement to be correspondingly reduced.

100. This is the kind of order that the court could use if it wanted to make an order that the non-member spouse is entitled to be paid a specified percentage of the whole of each of the splittable payments. This type of order will be able to be made for both percentage-only interests and interests that are not percentage-only interests. It is envisaged that this type of order would be most likely to be used when the superannuation interest is in the payment phase when the order is made.

101. However, as outlined in the notes to Amendments 12 and 18, for percentage-only interests it may not be appropriate or equitable, in some circumstances, for the specified percentage to apply to the whole of each of the splittable payments.

102. New paragraph 90MT(1)(c) will provide that if the interest is a percentage-only interest the court may make an order to the effect that whenever a splittable payment becomes payable in respect of the interest the non-member spouse is entitled to be paid an amount calculated in accordance with the regulations by reference to the percentage specified in the order.

103. The policy intention is that the regulations will provide a method for calculating the appropriate proportion of the splittable payment to which to apply the specified percentage. The policy intention is that the appropriate proportion of the payment will be referable to the period of the build up of the value of the superannuation interest until the breakdown of the marriage.

104. New paragraph 90MT(1)(d) mirrors existing paragraph 90MT(1)(b).

105. Existing subsection 90MT effectively provides that before making a splitting order the court must determine the overall value of the interest in accordance with the regulations and allocate a base amount to the non-member spouse, not exceeding the overall value.

106. It is not necessary to determine the overall value or the base amount in all circumstances, for example where the order that the court wishes to make is an order that specifies a percentage to apply to the splittable payments. Also, in some circumstances, for example when the member demonstrates to the satisfaction of the court that they are facing imminent retrenchment, it will not be appropriate to use the prescribed method of valuation to determine the value of the specific individual interest.

107. New subsection 90MT(2) will provide that if the regulations prescribe a method of determining the value of the interest, then the court must determine the value in accordance with the regulations. However it will also provide that if the regulations do not provide such a method, then the court must determine the value of the superannuation interest as it considers appropriate.

108. The regulations will prescribe a method of valuing defined benefit superannuation interests and also valuation factors to be used in applying the prescribed method. The prescribed method and factors are the default method and factors that will generally be used.

109. For some superannuation funds, however, the prescribed method or the prescribed valuation factors may not be appropriate, for example if the fund’s experience is significantly different to the actuarial assumptions underpinning the valuation factors.

110. The policy intention is to allow funds to seek permission to use methods or factors that are different to the prescribed method or prescribed factors.

111. New subsection 90MT(3) will provide that regulations may provide for the value of the superannuation interest to be determined wholly or partly by reference to methods or factors that are approved by the Minister for the purposes of the regulations.

112. New subsection 90MT(5) will effectively replicate existing paragraph 90MT(2)(b) but limit its application to interests that are not percentage-only interests.

Amendment 27 – Section 90MU – flagging order

113. Amendment 27 will omit existing subsection 90MU(2) and substitute new subsection 90MU(2).

114. Existing subsection 90MU(2) provides that the court must take into account, when deciding whether to make an order for a payment flag, the likelihood that a splittable payment will soon become payable. It also provides that the court may take into account other relevant matters.

115. If the parties are making a superannuation agreement, there is no similar requirement that they must take this likelihood into account and the policy intention is that the considerations in making an agreement should be similar to the considerations in making an order.

116. New subsection 90MU(2) will provide that the court may take into account relevant matters and in particular take into account the likelihood that a splittable payment will soon become payable. This will remove the requirement that the court must take such a likelihood into account.

Amendments 28, 29, 30 and 31 – Section 90MX – multiple payment splits

117. Amendments 28, 29, 30 and 31 are drafting amendments.

118. These amendments will omit references in section 90MX to “date” and “dates” and substitute references to “time” and “times”.

Amendment 32 – Section 90MY – fees payable to trustee

119. Amendment 32 will omit existing section 90MY and substitute new section 90MY.

120. Existing section 90MY provides that the regulations may prescribe fees payable to the trustee in respect of a payment split, prescribe different fees in different circumstances and prescribe who is liable to pay the fees.

121. This is in contrast to the general superannuation industry legislation, under which there is no prescription of either the circumstances in which fees may be charged or of the quantum of the fees which may be charged.

122. The difficulty with prescribing both the circumstances in which fees are charged, and the quantum of those fees, is that this is not appropriate for every superannuation fund. Some funds may wish to charge fees for certain actions while others may not. Some superannuation funds may wish to charge minimal, if any fees. However, small superannuation funds may, in order to cover the costs associated with a payment split, need to charge larger fees to reflect the fact that there will not be economies of scale in implementing a payment split for an individual member.

123. New subsection 90MY(1) will provide that the regulations may allow trustees to charge reasonable fees in respect of a payment split or in respect of the operation of Part VIIIB in relation to a superannuation interest. It will also provide that the regulations may prescribe the person(s) liable to pay the fees.

124. New subsection 90MY(2) will provide that if a fee remains unpaid after it is due, then the trustee will be able to recover the amount unpaid from any amounts that would become payable. This will mean that, in effect, the trustee will be able to deduct the unpaid fee from the superannuation interest prior to making a payment from it.

Amendment 33 – Section 90MZ – superannuation preservation requirements

125. Section 90MZ provides, in effect, that the entitlement of a non-member spouse will be subject to any regulations made under the SIS Act that provide for the preservation of entitlement.

126. The policy intention is that the entitlement of the non-member spouse is to be preserved in the superannuation system until the non-member spouse reaches a condition of release. That is, if the member spouse reaches a condition of release that triggers a splittable payment, the non-member spouse would only be able to receive their entitlement if they have themselves reached their own condition of release.

127. Amendment 33 will insert a reference to an “approved deposit fund” into subsection 90MZ(1) to ensure that a superannuation interest that is an approved deposit fund is also preserved as intended.

Amendment 34 – Section 90MZ – superannuation preservation requirements

128. Amendment 34 will insert a reference to an “exempt public sector superannuation scheme” into subsection 90MZ(3).

129. The reasons for this are the same as those outlined in the notes to Amendment 33.

Amendment 35 – Section 90MZA – waiver of rights under payment split

130. Section 90MZA provides for the non-member spouse to serve a waiver notice on the trustee and for the effect of such a waiver notice.

131. Amendment 35 will insert a note at the end of subsection 90MZA(1), to clarify the effect of the waiver notice.

Amendment 36 – Section 90MZB – trustee to provide information

132. Amendment 36 will omit existing section 90MZB and substitute new section 90MZB.

133. Section 90MZB provides that the trustee has to provide information to an eligible person to assist that person to negotiate a superannuation agreement or assist the person in connection with the operation of Part VIIIB.

134. New subsections 90MZB(1), (3) and (8) are in identical terms to existing subsections 90MZB(1), (3) and (4) respectively.

135. New subsection 90MZB(2) will insert into existing subsection 90MZB(2) the additional requirement that the application for information is to be accompanied by any fee payable under section 90MY.

136. New subsection 90MZB(3), which is in identical terms to existing subsection 90MZB(3), will provide that if the trustee receives an application for information that complies with section 90MZB, the trustee must, in accordance with the regulations, provide information about the superannuation interest to the applicant.

137. If the trustee is a trustee pursuant to new section 90MDA, which is being inserted by Amendment 15, the trustee is a person who has the power to make payments in respect of the superannuation. That kind of trustee may not be a person who would have available the information about the superannuation interest that the applicant is seeking. Similarly, that kind of trustee may not be the most appropriate trustee to provide the information. The policy intention is, therefore, that in specified circumstances such a trustee not be required to provide information to the applicant.

138. New subsection 90MZB(4) will provide that, for the purposes of subsection 90MZB(3), regulations may specify circumstances in which the trustee is not required to provide information. Amendment 36 will include an example after new subsection 90MZB(4), describing a circumstance in which the regulations might so provide.

139. It is clearly necessary to enable a person to obtain information about a member’s superannuation interest for the purposes of Part VIIIB. However, privacy policy demands that, to the extent possible, the member’s privacy be protected and that information is not inappropriately disclosed.

140. New subsection 90MZB(5) will provide that it is an offence for the trustee to provide, in response to an application for information, any address of the member.

141. New subsection 90MZB(6) will provide that it is an offence for the trustee to inform the member that an application for information has been received.

142. The trustee will also be required, under the Family Law Regulations, to provide the non-member spouse with information about their entitlement under the payment split. Again it is necessary to protect both the member’s and the non-member’s privacy to the extent possible.

143. New subsection 90MZB(7) will provide that the regulations may require the trustee to provide this information and that it will be an offence to contravene the regulations about the provision of information. This will mean that it will be an offence for the trustee to provide information that it is expressly required not to provide.

Amendment 37 – Section 90MZD – orders binding on trustees

144. Amendment 37 will omit existing subsection 90MZD(1) and substitute new subsection 90MZD(1).

145. New subsection 90MZD(1) will provide that an order in relation to a superannuation interest may be expressed to bind the person who is the trustee of the superannuation plan at the time when the order takes effect. However, it will also provide that there are limitations on this power.

146. It is not possible to make an order binding a third party to the proceedings unless the third party has been accorded procedural fairness in relation to the making of the order. As noted in the Explanatory Memorandum to the Family Law Legislation Amendment (Superannuation) Bill 2000, it is intended that procedural fairness, in this context, will imply that the trustee has been given notice of the proceedings, been informed of when the proceedings will be heard by the court and been given an opportunity to be heard in the proceedings.

147. New paragraph 90MZD(1)(a) will provide that in the case of a trustee who is not a secondary government trustee, the court cannot make such an order unless the trustee has been accorded procedural fairness in relation to the making of the order.

148. However, in the case of a secondary government trustee, who has the power to make payments to members of the plan but may have no other powers, it will not be necessary for the trustee to have been accorded procedural fairness before the court can make an order. The constitutional requirements are satisfied if, in the case of a secondary government trustee, another trustee has been accorded procedural fairness in relation to the making of the order. New sub paragraph 90MZD(1)(b)(i) will provide for this.

149. It may, however, be the case that the court thinks it appropriate that a secondary government trustee be accorded procedural fairness. New subparagraph 90MZD(1)(b)(ii) will provide that the court may, if it thinks fit, require that the secondary government trustee be accorded procedural fairness.

Amendment 38 – Section 90MZH – terminating employment

150. Amendment section 38 will insert new section 90MZH after section 90MZG.

151. In order for the payment splitting regime to operate efficiently to enable a superannuation interest to be divided on marriage breakdown, it is essential that a person not be able to discriminate against a member on the basis that their superannuation interest has been dealt with under Part VIIIB of the Family Law Act.

152. New section 90MZH will provide that it will be an offence for a person to terminate the employment of an employee on the ground that the employee’s superannuation interest is subject to a payment flag, a superannuation agreement or a splitting order.

Superannuation (Resolution of Complaints) Act 1993

153. The Superannuation (Resolution of Complaints) Act 1993 (‘the Complaints Act’) provides a low cost dispute resolution mechanism to deal with complaints made by members and beneficiaries of superannuation funds about decisions of trustees that are not settled through a fund’s internal complaints mechanism. The policy intention is that the non-contributing spouse, if he or she does not become a member of the fund, should be able to make a complaint to the Superannuation Complaints Tribunal (‘the Tribunal’) about their treatment by the superannuation fund. The policy intention will be effected through the making of regulations under the Complaints Act during the period before the Bill is proclaimed to treat the non-contributing spouse as within one or more categories of persons who may make a complaint to the Tribunal.

Amendments 39 and 40 – Subsection 3(2) – definitions

154. The Bill, for the purpose of enabling, by the means mentioned in the preceding paragraph, a non-contributing spouse to make a complaint to the Tribunal, will amend subsection 3(2) of the Complaints Act to insert definitions of the terms beneficiary and member in that Act having a meaning affected by proposed new section 4B of that Act proposed by the Bill.

155. Amendments 39 and 40 will further amend subsection 3(2) of the Complaints Act to insert definitions of two more terms, the terms holder and person who has an interest, which will also have a meaning affected by proposed new section 4B.

156. Amendment 41 – Section 4B– modified meaning of some expressions

157. Amendment 41 will omit new section 4B of the Complaints Act proposed by the Bill and substitute a new section 4B.

158. New section 4B will provide for the modified meanings of beneficiary, member, holder and person who has an interest. The new section is to the same effect as section 4B proposed by the Bill, except that it introduces the concept of a ‘qualifying person’, which has 4 categories – the 2 categories (beneficiary and member) first proposed by the Bill, and the other 2 categories (holder and person who has an interest) proposed by these amendments.