The new regime has very broad application and applies to almost all types of superannuation interests except overseas superannuation.75 Stephen Bourke, the architect of the scheme, opined that ‘[it] is difficult to conceive of a form of superannuation that is not covered.’76 The mechanism by which this coverage is achieved is contained in s 90MC of the FLA which provides:
90MC Extended meanings of matrimonial cause and de facto financial cause
(1) A superannuation interest is to be treated as property for the purposes of paragraph (ca) of the definition of matrimonial cause in section 4.
(2) A superannuation interest is to be treated as property for the purposes of paragraph (c) of the definition of de facto financial cause
‘Superannuation interest’ is defined to mean:
an interest that a person has as a member of an eligible superannuation plan, but does not include a reversionary interest. 77
This definition is not specific and requires an examination of the definition of ‘eligible superannuation plan’ for guidance which is defined as being any of:
(a) a superannuation fund within the meaning of the SIS Act; (b) an approved deposit fund;
(c) an RSA;
(d) an account within the meaning of the Small Superannuation Accounts Act 1995; (e) a superannuation annuity (within the meaning of the Income Tax Assessment Act 1997)78
and these terms are defined by the legislation. It is important to note that ‘superannuation fund’ is defined to be:
(a) a fund that:
(i) is an indefinitely continuing fund and
(ii) is a provident, benefit, superannuation or retirement fund; or (b) a public sector superannuation scheme.79
Thus the reference to ‘a superannuation fund within the meaning of the SIS Act’ is not limited to regulated superannuation funds but has more extensive application and includes funds that fail to comply with the SI(S)R.80 The majority of superannuation funds choose to be regulated by and comply with the SI(S)A to obtain taxation concessions which can be lost in the event of non compliance. A superannuation fund must also be either a constitutional corporation to
75 Stephen Bourke, ‘The New Scheme to Divide Superannuation on Marriage Breakdown’ (Paper presented at
the Law Society of South Australia Continuing Legal Education, Adelaide, 6 September 2001) 8; Lesbirel &
Lesbirel (2006) FLC ¶93-301[10]–[12](‘Lesbirel’). 76
Bourke, ‘The New Scheme …’, above n 75, 8. The coverage of pt VIIIB was extended by the Family Law
Amendment (Annuities) Act 2004 (Cth) to include superannuation-like annuity products, a limited interest
previously thought to be excluded from the operation of the scheme.
77 FLA s 90MD (definition of ‘superannuation interest’). 78
Ibid s 90MD (definition of ‘eligible superannuation plan’).
79 SI(S)A s 10 (definition of ‘superannuation fund’). 80 Watts, Bourke and Taussig , above n 29, 17.
establish a connection with s 51(xx) of the Australian Constitution or have the provision of old age pensions as its sole or primary purpose to establish a link with s 51(xxiii).
In addition to regulated funds superannuation is provided by other types of funds, such as approved deposit funds, retirement savings accounts, self-managed superannuation funds, small superannuation accounts, pooled superannuation trusts, public sector funds and public offer funds, which comply with prudential requirements entitling them to concessional tax treatment.
Because there are many different varieties of superannuation interests the new regime is not straightforward. The relevant legislative pathway depends upon the type of superannuation interest. The legislation applies to accumulation interests which are now the simplest and most widespread form of superannuation interest.81 For the purpose of the amendments the definition of ‘accumulation interest’ is exclusionary. It is an interest or component of an interest which is ‘not a defined benefit interest or a small superannuation accounts interest’. The legislation also applies to partially vested accumulation interests. An accumulation interest is defined to be a partially vested accumulation interest ‘if the withdrawal benefit … is less than the total amount notionally or actually allocated to the member spouse at that date’.82 There are three exceptions, namely, where the withdrawal amount is less than the notional amount because of reductions for any outstanding surcharge, insurance costs or other fees, taxes or charges.83
As well the legislation applies to defined benefit interests. A defined benefit interest is defined to be a superannuation interest the whole or a component of which is determined by multiplying either a specific amount or an amount relating to the member’s salary, at retirement or averaged over a prior period of time, by an accrued benefit multiple depending upon years of membership of the scheme.84
Prior to the amendments the difficult task of fairly evaluating superannuation was compounded by the fact that the resignation value of partially vested accumulation interests and defined benefit interests did not include a value for the unvested component of the entitlement and therefore did not provide a proper basis for valuation of the entitlement. The amendments seek to specifically address this issue.
The amendments apply to approved deposit funds,85 small superannuation accounts,86 retirement savings accounts,87 self managed superannuation funds,88 public sector interests,89 annuities and pensions. Hybrid interests are also covered. The amendments apply whether the interests are in the growth phase or the payment phase.
As well a new category of interest for the purpose of implementing the amendments is created. The percentage-only interest is defined as ‘a superannuation interest prescribed by the
81 FL(S)R reg 3 (definition of ‘accumulation interest’).
82 Ibid regs 3 (‘definition of ‘partially vested accumulation interest’), 9. 83
Ibid reg 9(2).
84 Ibid regs 3 (definition of ‘defined benefit interest’), 5.
85 Ibid reg 3 (definition of ‘approved deposit fund’), FLA s 90MD (definition of ‘approved deposit fund’). 86 Ibid reg 3 (definition of ‘small superannuation accounts interest’).
87
Ibid reg 3; FLA s 90MD (definition of ‘RSA’).
88 FL(S)R reg 3 (definition of ‘self managed superannuation fund’). 89 Ibid reg 3 (definition of ‘public sector superannuation scheme’).
regulations for the purposes of this definition’.90 The list of prescribed percentage-only interests was initially confined to the interests of judges and parliamentarians having extreme ‘cliff vesting’ scales.91 Generally the value of such an interest increases greatly upon the occurrence of a particular event or the fulfilment of a specified condition. However, in 2005 this category of interest was extended to certain superannuation-like annuity products purchased wholly out of rolled over amounts.92 This was to ensure that such interests were captured by the requirements of pt VIIIB rather than pt VIIIAA relating to third parties. Percentage-only interests, as the name suggests, can only be split by reference to a percentage of future payments. The number of these types of interests is comparatively small and is likely to remain limited.
Thus the amendments apply to almost all types of superannuation. The characteristics of particular entitlements are relevant to their treatment in property proceedings as is the impact of any decision to make a splitting order in respect of a particular entitlement.93 The amendments therefore require a much greater understanding of the complexities of superannuation than previously.