• Introduction
• The treatment of superannuation under the Act
• Contributions to superannuation interests
• The approach under the Family Law Act
• Why is superannuation important?
• Family Law Legislation Amendment (Superannuation) Act 2001 (Cth)
• Options for reform

INTRODUCTION

7.1 The expansion of superannuation savings has had an enormous impact on family finances. Savings accumulated in superannuation represent an increasingly significant proportion of family wealth, often second only to the family home. In some cases, it is the only notable asset at the end of a relationship. Yet, despite its increasing importance in household finances, superannuation rarely figures in property proceedings under the Property (Relationships) Act 1984 (NSW) (“the PRA”). Where it is taken into account, the NSW Supreme Court seldom considers that the non-member partner is entitled to an interest in the member partner’s prospective entitlements. In any case, the courts have very limited powers under the Act to deal with superannuation in a just and equitable way.

7.2 Currently, superannuation is considered a financial resource under the Act and cannot therefore be made the subject of any order itself. In those rare cases where the court considers that the non-member partner should have a share of the value of the superannuation entitlements that have accrued over the course of the relationship, the court has only two options, neither of which is satisfactory.

7.3 The first option is to adjourn the property proceedings to a later time when the superannuation vests in possession and can therefore be treated as property. However, this could be several years away from the hearing and leaves both parties in financial limbo, contrary to the clean break principle to which the courts should adhere.

7.4 Alternatively, the court could give the non-member partner a larger share of available property by taking into account the value of the superannuation entitlement at the time of hearing. This requires the court to ascribe a nominal value to the superannuation entitlement, which is a complex and difficult task in some cases, particularly in defined benefit schemes.¹ This strategy usually means that one of the parties ends up with all or most of the family property but no financial security for their retirement, whilst the other is left with a very generous superannuation entitlement, inaccessible until retirement, but is cash-strapped at the present time.

7.5 The treatment of superannuation on relationship breakdown, particularly on divorce, has been on the reform agenda for many years. In this chapter, the Commission examines how superannuation has been dealt with under the PRA and compares its treatment under the Family Law Act 1975 (Cth) (“the FLA”). Integral to this examination is an analysis of recent amendments to the FLA which empower the Family Court to divide superannuation entitlements between married persons on divorce.

THE TREATMENT OF SUPERANNUATION UNDER THE ACT

Is superannuation “property” under the PRA?

7.6 Superannuation is not property, but is a “financial resource.” The definition of financial resource in subsection 3(1) of the Act includes prospective claims or entitlements in respect of a scheme under which superannuation benefits are provided.

7.7 Furthermore, the Act provides that, when adjusting property interests under s 20, the court must have regard to the financial and non-financial contributions of the parties towards their superannuation entitlements. According to the then President of the Court of Appeal, Justice Kirby, in the authoritative case of Green v Robinson,² the Act makes it very clear that first, superannuation is a financial resource and second, that there is an obligation on the court to take such entitlements into account under s 20.³ Subsequent cases have confirmed that the court must consider each party’s superannuation entitlement when assessing their relative financial positions in adjustment proceedings under the Act.⁴

Family Law Act jurisprudence

7.8 New South Wales de facto relationships legislation was modelled on jurisprudence that developed under the FLA. Although this will shortly be superseded by amendments expected to become operative by the end of 2002,⁵ existing jurisprudence still represents current law and unless similar reform occurs in NSW, continues to inform debate on current de facto relationships law in this State.

7.9 Numerous Family Court decisions have held that superannuation is not property under the FLA because it is only a contingent asset.⁶ This is because most superannuation funds are set up as discretionary trusts and any benefits that are subsequently paid are at the discretion of the fund trustee. A fund member does not become entitled to receive any payment from the trust until a condition of release is met, that is, until the member retires, resigns or dies. The Family Court has therefore consistently held that superannuation is a financial resource under the FLA. So while it can be considered as part of the assets of the parties in property proceedings (when considering the needs and means of the parties under the s 75(2) factors),⁷ it cannot itself be divided.⁸

7.10 However, the Family Court does consider superannuation to be property in some instances, depending on what the deed that creates the fund says and on all the relevant facts and circumstances relating to the fund and to the parties.⁹ For example, superannuation will be treated as property and as such be available for distribution where the parties or one of them is the trustee of a private superannuation fund and can easily access their entitlements without suffering any detriment.¹⁰ This general principle has been adopted in NSW.¹¹

7.11 As mentioned above, the way superannuation is treated on divorce is set to change radically once the Family Law Legislation Amendment (Superannuation) Act 2001 (Cth) becomes operative (“the Family Law Superannuation Act”). By virtue of these amendments, the Family Court will be directed to treat superannuation as property for the purposes of making an order under s 79, and will have power to make orders to split a party’s superannuation entitlements.¹²

South Australian experience

7.12 Interestingly, only South Australia’s de facto relationships legislation defines property to include prospective entitlements to superannuation.¹³ In theory, this means that the parties’ interests in superannuation can be subject to an adjustment order, though the Commission is unaware of any instances where superannuation has been so divided. No other State de facto relationship legislation goes this far although there is now increasing pressure on all the States and Territories to adopt the new federal model so that de facto couples whose relationships break down are treated the same as married couples under the law as regards superannuation.¹⁴

CONTRIBUTIONS TO SUPERANNUATION INTERESTS

7.13 As detailed in the previous chapter, the court has power under the PRA to adjust the parties’ interests in property, in a just and equitable way. In doing so it should have regard to both the financial and non-financial contributions of the parties, not just to the acquisition, conservation and maintenance of property, but also to the accumulation of the parties’ financial resources.¹⁵ The court must, under s 20, take into account each party’s contributions, both financial and non-financial, to the other’s superannuation entitlements.¹⁶ This is quite distinct from the position under s 79(4) of the FLA, which does not require the Family Court to consider the contributions of the parties towards the parties’ financial resources. The Family Court considers these as part of the overall assets of the parties to which both have contributed during the marriage.¹⁷

Requirement of proof of contributions under the PRA

7.14 A distinguishing feature between the treatment of superannuation under the PRA and under the FLA is that, in NSW, the Supreme Court requires proof that one partner has contributed to the other’s superannuation interest before it will consider the non-member partner entitled to a share of the member-partner’s superannuation interest.

Green v Robinson

7.15 In Green v Robinson, the majority of the Court of Appeal held that in order to justify an adjustment of the available property in the appellant’s favour, the appellant was required to show proof that she had made some contribution to the respondent’s superannuation interest. Powell JA held that once such proof of contributions was established, it was then “just and equitable” that some order based upon, or derived from, those entitlements should be made.¹⁸ But he did not consider that the appellant met this requirement. Nor did Cole JA, who found that because superannuation was a direct deduction from the respondent’s salary, she had made no direct or indirect contribution to it, nor he to her entitlement.¹⁹

7.16 The President of the Court of Appeal, Kirby P, as he then was, delivered a strong dissenting judgment. He said:

… But, with respect, the error in his Honour’s approach, is to require, in effect, proof by evidence of the direct or indirect contributions made by Ms Green to Mr Robinson’s accumulating superannuation entitlements during the relationship. Such proof is not required in cases under the Family Law Act. In my view, the express mention of superannuation entitlements in section 3(1) of the De Facto Relationships Act, makes it plain that Parliament accepted that ordinarily, partners to such relationships would be making at least indirect, if not direct, contribution to the accumulation of the form of savings which superannuation constitutes. That, in my view, gave Ms Green, for the period of the relationship at least, such a stake in that aspect of the “financial resources” of Mr Robinson, as must be reflected in a “just and equitable order”, designed to adjust the interests of the partners, as section 20(1) of the Act requires.

An analysis of cases since Green v Robinson

7.17 An analysis of reported and unreported cases since the prevailing majority view in Green v Robinson shows that few if any applicants who have made a claim against their partner’s superannuation entitlements, has ever been successful.²⁰ Nor have decisions been particularly consistent.

7.18 One of the reasons for this is that it is not clear what will constitute sufficient proof to satisfy the court that contributions to the other partner’s superannuation entitlements have been made. As one Master has commented:

… it is not easy to reconcile the different views but it would appear from the comments of Powell JA and Cole JA that there must be some factual matter which enables one to form the view that there had been a contribution to a spouse’s superannuation entitlements. A common example of this would be a partner who stays at home to look after children thus enabling the other partner to go to work and earn a superannuation entitlement.²¹

… that option is not available. Here, we are concerned with a situation where both parties were effectively working and there is very little evidence of where the money came from. In fact, there is none. It seems to be an assumption that the defendant paid it but I do not know whether or not this is in fact right or whether there might have even been employer contributions.²³

Pooling of resources

7.21 The only cases in which both parties were working and where superannuation interests were included in the adjustment process were those cases where it was demonstrated to the court that the parties pooled their resources and made joint use of funds. In Blonk v Welch, for example, the plaintiff declined an opportunity to sacrifice a portion of her salary by increasing her superannuation entitlements (and thus reduce income tax liability). Instead, on the advice of her partner, she took a higher salary in order to put money towards their joint purposes, namely renovations to their home. The defendant had also told the plaintiff that they would rely on his superannuation for their retirement. So when the relationship ended, she had only a small sum invested in her superannuation account whereas he had almost $105,000, of which approximately $27,000 had been accumulated during the relationship and a separate preserved portion (of $10,500) had been accumulated over the course of his employment. The Master distinguished this case from Green v Robinson, referring to her expectation interest that the relationship would continue and that she would be able to rely on his superannuation in retirement.²⁸ She was awarded half of his superannuation entitlements that had accumulated over the course of their 10-year relationship.²⁹

7.22 In the later case of Gazzard v Winders, however, where again both parties had worked throughout the relationship, the Master took the majority view in Green v Robinson and concluded that there was no evidence to prove that the applicant had contributed to the defendant’s superannuation entitlement. On appeal, the Court of Appeal took a different view. Beazley JA³⁰ held that the court should not disturb how the parties had voluntarily organised their affairs, which was to contribute their whole incomes to the joint needs and purposes of the relationship. They always considered themselves equally entitled to any property which they had acquired, which was held in equal joint names. But because their one significant asset had been bought using his redundancy and superannuation payout, Beazley JA said that the court should examine this more closely:

Superannuation and pension entitlements, are of course, financial resources for the purposes of s 20(1)(a): see s 3(1). As such the court is required to take account of any direct or indirect contribution made by the parties to that resource. In the present case, there was no evidence that the appellant had made any contribution of either nature to either the respondent’s pension or entitlements: see Green v Robinson per Powell JA at 108-109 and Cole JA at 118. There is perhaps one qualification to that. The superannuation scheme was contributory and to that extent the parties did not have available to them on a weekly basis the amount of the superannuation contribution. This was not, however, a large amount. However, the matter is relevant because of the invariable practice of the parties to use their incomes jointly. A proportion of the entitlements accumulated prior to the parties’ cohabitation. It is not possible to ascertain to what extent the pre-cohabitation accumulation is reflected in the fund payout figures. It may be, and is likely, that the entitlements increased with the respondent’s increase in salary. Be that as it may, there can be no doubt that a significant amount of the entitlements accumulated prior to the parties’ relationship.

Notwithstanding that if there was any contribution by the appellant to the respondent’s contributory scheme it was only small, it is still relevant to consider the respondent’s pension and superannuation entitlements against the background of the way in which the parties dealt with their several incomes and assets, namely as available for their joint use.³¹

7.24 In a similar case in Victoria, the applicant was found to be entitled to an order adjusting the interest of the defendant in the amount he contributed to the superannuation fund by salary sacrifice because it was their practice to pool their resources for the purposes of the acquisition, conservation and improvement of their properties, their business and household living expenses. The court said:

By putting aside $19 per week from his salary during the period of the de facto relationship the defendant put out of reach of the plaintiff a small portion of his income which she was entitled to share as a partner. Now it is just and equitable that it be brought into account.³²

7.25 Superannuation has also been included in the adjustment process where contributions are made to a private superannuation fund from a jointly operated business. In the NSW case of McGrath v Ter Hedde, the de facto couple set up their own private superannuation fund. Contributions were made to each of their accounts in the superannuation fund from the newsagency business, which they owned. His contributions were greater than hers because he was older and therefore due to retire sooner. In these circumstances, the Master found that the total of the contributions should be equally shared in the adjustment process.³³

7.26 Private superannuation funds are often tax effective ways of saving and, therefore, both the Family Court and the Supreme Court have concluded that they should be regarded as property.³⁴ Private superannuation funds held by couples are more likely to be treated as assets if:

(a) it is clear to the court who the beneficiaries are;

(b) if there is no evidence to suggest that either party would suffer unfair disadvantage if the fund or part of the fund were realised; and

(c) if the superannuation fund was clearly set up for both parties or for one of them.

Where the entitlement has vested

7.27 Superannuation, which has vested in the possession of the contributor, is property.³⁵ But even in such cases, the courts have applied the same strict approach when assessing contributions to the parties’ superannuation interests.³⁶

Contributions to superannuation made before the relationship

7.28 Contributions made before the relationship began are not generally taken into account.³⁷ The relevant entitlement is the pro rata amount that has accumulated during the course of the relationship.³⁸

Other types of financial resources

7.29 The same principles have been held to apply to other types of financial resources to which the parties may be entitled. Mostly, these relate to redundancy payments and long service leave entitlements. Like superannuation, they are contingent on certain events occurring and as such fall within the category of financial resources rather than property. The Family Court has held that sums accruing, or paid, by way of redundancy payments or long service leave entitlements are financial resources which the court may consider when determining a property settlement under s 79 of the FLA.³⁹

7.30 This decision has been followed in matters under the PRA.⁴⁰ However, in NSW, the court has also extended the requirement of proof of contributions. Thus the court will only consider it appropriate to have regard to such entitlements when making a property order under s 20 if it is satisfied that the plaintiff made some contribution to the defendant’s entitlement to receive redundancy payments and long service leave entitlements.⁴¹

Orders available to the court

7.31 As superannuation is not property, unless it has vested in a party’s possession or is accumulated in a private fund that can be easily accessed without detriment, the court cannot make an order to divide a party’s superannuation interest itself. If the court determines that it is appropriate to recognise some contribution to the acquisition of superannuation entitlements, it can only adjourn proceedings until a later time when the superannuation interest will vest or make a further adjustment to presently available property.⁴² Each of these options poses problems.

Power to adjourn proceedings

7.32 Section 21 of the PRA gives the court power to adjourn property proceedings under the Act if there is a likelihood of a significant change in financial circumstances of one or both of the parties and where it is reasonable to do so. In cases where the court cannot make a just and equitable property order because there are insufficient assets presently available, an adjournment of the proceedings may be the only solution. However, if the parties are years away from retirement, an adjournment may not be desirable. Creating a situation whereby the parties’ financial affairs remain unresolved for many years after separation not only exacerbates and prolongs what is often a very difficult experience for the parties, but is contrary to the clean break principle. Under s 19, the court is directed to make orders which will finalise the parties’ financial affairs once and for all, so that parties can move on with their lives.

7.33 Where proceedings are adjourned, there is also a risk of the non-contributing partner losing most, if not all, of their entitlements. This will occur if, for example, the member-partner dies before the superannuation vests. In this case only the preserved component of the superannuation fund is paid out. Decisions regarding the division of superannuation pursuant to a property claim under the PRA, years after the relationship ended, may become even more complicated if there are other potential beneficiaries including, quite possibly, new partners.

7.34 If the non-contributing spouse dies before the member satisfies a condition of release, the treatment of superannuation interests will depend on the type of the fund in question. For accumulation funds, death is a condition of release and the death benefit will be paid to a dependent or dependents or to the estate, depending on the wishes of the deceased.⁴³

7.35 For an interest that is notionally divided or flagged in a defined benefit scheme, the interest would be statutorily transferred into the names of the dependents, if any, of the non-contributing spouse. If there are no dependents the interest will be transferred into the name of a person at the direction of the executor of the deceased’s estate.⁴⁴

7.36 Same-sex couples face further difficulties. Although fund members are entitled to nominate a beneficiary in case of death, in the case of a member nominating his or her same sex partner, such a nomination will only be binding on the trustee if the nominee is a legal personal representative or a dependent of the member.⁴⁵ The current definition of dependent does not include a same-sex spouse. So a form nominating the member’s same-sex partner as the beneficiary will not be binding unless a court orders otherwise.

Offsetting claims to superannuation against other property

7.37 In most negotiations for settlement of a couple’s financial affairs, parties are likely to trade off their share in the value of superannuation interests for a larger proportion of the family home. For women who are responsible for the care of children, securing the house is frequently a more important and pressing consideration than setting aside income for their retirement.

7.38 While there is no dispute that where there are children involved, their interest in terms of safe and secure housing is a priority, there are concerns that many people who trade off their interest in their partner’s superannuation may be selling themselves short. This is because they may not appreciate the true value of superannuation interests; bearing in mind the favourable taxation treatment that putting aside income in superannuation funds attracts. These concerns apply mostly to women because they tend to have major caring responsibility for the children⁴⁶ and because they also tend to have less knowledge and less access to information about financial matters.⁴⁷ Of course, this option is also only feasible where there is other adequate available property against which superannuation entitlements can be offset. In cases where there are few or low assets, superannuation is of even greater relative importance.⁴⁸ This may be the case, for example, where there is little equity in the family home and the major asset of the parties is the earning capacity of one of them. However, in these cases, the only course open to the court is to adjourn proceedings until the superannuation vests, which might not occur for some years.

Joan and Peter have been in a de facto relationship for 12 years. They have 2 children, aged 10 and 8. Peter, 47, is an executive earning $90,000 pa and Joan, 44, was a secretary before the children were born. Their main asset is a house with a value of $500,000 but they still owe $250,000 on it. Their other major asset is his superannuation of $100,000. If they were to split up, Joan would not be able to keep the house, as she couldn’t afford the repayments on the mortgage. Her share of the equity would not be enough for her to buy another house for her and the children in the same area. To overcome these difficulties, the court can take the super into account as a financial resource when splitting the other assets of the parties. Assuming that the court is satisfied by evidence that she contributed to his superannuation, she may be entitled to a further property adjustment based on what the court considers to be her fair share of the superannuation entitlement. However, while this may allow Joan to relocate to a smaller home in the same suburb, she is left with little prospect of being financially secure in her retirement.

THE APPROACH UNDER THE FAMILY LAW ACT

7.39 The current approach to superannuation in property proceedings under the FLA is set to change significantly. The Family Law Superannuation Act, which has recently been enacted by the Commonwealth Parliament, radically changes the options available to parties and the Family Court in respect of superannuation on marriage breakdown.⁴⁹ These amendments, which are due to take effect by late 2002, are examined in detail below. It is useful before doing so, however, to examine the current approach to superannuation under the FLA and identify the inadequacies of the current approach that the amendments were designed to remedy. It is useful because the same problems beset de facto couples when their relationships end. This gives rise to the question whether the same amendments should be adopted in NSW.

Provisions of the Family Law Act

7.40 The FLA directs the Family Court to take the existence of superannuation into account when dealing with property alteration and spousal maintenance claims. In particular, s 75(2)(f) requires the court to take into account the eligibility of either party for a pension, allowance or benefit under “any superannuation fund or scheme where the fund was established or operates within or outside Australia”. Section 75(2)(b) is also relevant in property proceedings where an entitlement to superannuation is at issue. This provision directs the court to take into account the income, property and financial resources of each of the parties.

7.41 Numerous Family Court decisions have made it clear that in most cases an entitlement under a superannuation scheme is to be regarded as a financial resource.⁵⁰ But this is not a hard and fast rule. Private superannuation funds, for example, are often merely tax effective savings schemes, and may therefore be regarded as property.⁵¹

Current policy approach under the Family Law Act

7.42 The Family Court tends to proceed on the basis that superannuation is a nest egg for the retirement of both parties and not just for the contributor.⁵² It considers superannuation to be a form of savings by the parties, to which both have made direct or indirect contributions,⁵³ and a source of funds on which both reasonably expect to rely on retirement. In an early case under the FLA, the Full Court of the Family Court found that:

In most cases, the right to superannuation is not immediately realisable and therefore seldom able to be dealt with directly under s 79. It is however, always a very important factor to be taken into account when the adjustment of property rights between spouses is sought, although quantification of such a factor can be very difficult. Contribution by one spouse to superannuation usually means the loss of moneys available for the current support of the family in order to provide security for both spouses on the retirement of the contributing spouse. Loss of the right to share in the superannuation by a divorced non-superannuated spouse is an important financial consequence of the dissolution of the marriage.⁵⁴

How the Family Court deals with superannuation

Contributions to superannuation

7.44 As discussed previously, an adjustment based on the parties’ superannuation entitlements will only be made under the PRA if there is actual proof that one has contributed to the other’s superannuation. This is an almost insurmountable evidentiary burden and it is not surprising, therefore, that few property orders under the PRA have been made with an adjustment for superannuation.

7.45 The Family Court, by contrast, generally considers and assesses non-financial contributions to superannuation entitlements along with contributions to assets generally.⁵⁶ This means that if a wife’s contributions to the assets, other than the family home, are assessed at 30% then that contribution also flows to the superannuation entitlements.

Options to deal with superannuation

7.46 While it is clear that the Family Court can take superannuation into account when making decisions adjusting the property of the parties, how the court will do this is much less straightforward. Throughout the 1980s, the Family Court adopted various methods of dealing with superannuation when making property adjustment orders under s 79 of the FLA, none of which are particularly clear or consistent.

7.47 In the Marriage of West and Green, Justice Kay identified the three broad approaches that are generally open to a trial judge:⁵⁷

• take the superannuation entitlement into account as a financial resource of the member spouse under s 75(2)(b) and offset the non-member’s share of the superannuation against other property;⁵⁸ or
• adjourn the proceedings pursuant to s 79(5) until the superannuation vests; or
• fix the non-member spouse’s entitlement to the superannuation when it becomes available to the parties by using a mathematical formula.

Problems with the Family Court’s approach

7.49 The provisions dealing with superannuation under the FLA have been criticised extensively over many years from many quarters, including from the Family Court itself⁵⁹ and various other bodies.⁶⁰ In particular, it is argued the myriad approaches developed by the Family Court have created inconsistency and uncertainty, particularly for those people trying to negotiate a settlement rather than seek a court order. Key problems with the current approach of the Family Court were summarised by the Commonwealth Government in its position paper on superannuation and family law.⁶¹ Briefly, those problems include:

• the difficulties in determining the value of superannuation interests, not so much in accumulation schemes where valuation is relatively straightforward but in defined benefit schemes where valuation of the final benefit depends on a range of factors (including retirement age, salary at retirement, vesting rules etc) that are unknown at the time of settlement of the parties’ financial affairs;
• the inability of the Family Court to make orders against third parties such as to the trustee of a superannuation scheme to divide a superannuation interest;
• the fact that the legislation does not allow superannuation interests to be divided;
• the incapacity, in some cases, to offset the value of a superannuation interest against other property because of the lack of significant other assets;
• the lack of access to information about a former spouse’s superannuation entitlement and the concern that, as a result, some people are trading away their interest in superannuation without knowing the full value of that interest;
• the impracticality of adjourning proceedings unless the superannuation is due to be paid out in the short term; and
• the difficulty the Family Court has experienced in determining what weight it should give to the superannuation entitlement when making a property order, given the problems with valuation.⁶²

7.50 As superannuation coverage increases and as superannuation entitlements constitute a more significant proportion of household wealth, how superannuation is treated on relationship breakdown becomes more significant and finding more equitable ways of dealing with superannuation becomes more important. The limited options to deal with superannuation, in both current federal and State legislation, have a detrimental impact on those with less access to superannuation.

Increasing coverage of superannuation

7.51 The number of superannuation fund members and the value of superannuation savings have increased exponentially in the last two decades, largely as a result of the Commonwealth government’s retirement incomes policy. According to the Association of Superannuation Funds of Australia (ASFA), more than 8 million people currently save through superannuation. As at March 2001, there was $497 billion saved and invested in 22.76 million superannuation accounts.⁶³ This is projected to increase to $1.7 trillion by 2020.⁶⁴

7.52 The first major catalyst for growth came with the implementation of compulsory superannuation. This began with the Hawke Labor Government’s decision in 1986 to give workers a pay rise in the form of a 3% superannuation contribution by employers. This “award super”, as it became known, brought many more people into the superannuation net than ever before. Previously, superannuation was a benefit of employment reserved mainly for public sector employees and managers and other professionals in large companies. Award super greatly extended the coverage of superannuation. The introduction of the Superannuation Guarantee in 1992, which imposes an obligation on employers to make contributions to employees’ superannuation accounts, has ensured even greater coverage.⁶⁵

7.53 Superannuation coverage has more than doubled since 1984, rising to around 94% for employees with leave entitlements not working on a fixed-term contract and to 58% for self-identified casual employees. Superannuation coverage for all workers, including the self-employed, is now around 87%.⁶⁶ However, for those who have never been in paid work, superannuation coverage remains negligible because, until recently, contributions to funds were only permitted for those in paid work. Since 1997, a working spouse can now make contributions on behalf of a non-earning spouse in a superannuation fund or a retirement savings account, which should result in an increase in coverage for those outside the paid workforce.⁶⁷ However, this is likely only to benefit those couples with sufficient disposable income to make extra superannuation contributions.

Superannuation as a proportion of household wealth

7.54 According to recent economic modelling, superannuation constitutes an increasingly large proportion of the average Australian household’s financial wealth. While superannuation assets formed only 10% of household financial wealth in 1985, this figure had increased to over 20% by 1997.⁶⁸ Research shows consistently that superannuation is the most important asset and savings vehicle for most people, second only to the family home.⁶⁹

7.55 Recent research by the Australian Institute of Family Studies (AIFS) paints a similar picture. The Australian Divorce Transition Project, in which 650 divorced men and women were randomly surveyed, found that on average, superannuation accounts for 25% of the parties’ total asset wealth compared to just 14% in 1980.⁷⁰ For one quarter of respondents, superannuation was said to represent at least 40% of the parties’ total assets. The study also found that, in 82% of couples, at least one of the spouses had superannuation compared to just 55% in the 1980s.⁷¹

Disparate entitlements to superannuation

7.56 Although superannuation coverage of workers has increased substantially in the last two decades, the entitlements of those who have superannuation accounts vary considerably. While some highly paid professionals in generous superannuation schemes are likely to have amassed a substantial nest egg for their retirement, many others will be forced to supplement their meagre superannuation savings with the aged pension. The situation is particularly dire for women who tend to live longer than men but generally have much lower superannuation savings to see them through old age. Women are less likely to plan for retirement than men, even when they work full time.⁷² In 1997, 72% of women aged 61 years and over relied on the aged pension as their main source of income in retirement.⁷³ Many of those currently retired would not, of course, have had the benefit of compulsory superannuation contributions. These factors are compounded by the fact that women work a full-time equivalent of 20 years, while men work the equivalent of 38 years.⁷⁴ The 9% compulsory contribution is clearly inadequate to provide an adequate retirement income for women with a broken work history and whose average earnings are lower than those of men.⁷⁵

Disparate entitlements between men and women

7.57 Numerous reports have documented the disadvantage faced by women in relation to their access to superannuation.⁷⁶ For example, a 1992 report of the Senate Standing Committee on Legal and Constitutional Affairs, Half Way to Equal, found that women were significantly disadvantaged by the design of superannuation schemes which were predominantly geared towards unbroken full-time workforce patterns.⁷⁷ A recent study states that a woman’s nest egg will be 70% of the average man’s; this is largely due to interrupted work history and lower wages.⁷⁸

7.58 Superannuation is, by and large, a benefit of employment. It is primarily tailored to a pattern of employment that better reflects men’s, as opposed to women’s, paid work experience. In other words, those who work for long and continuous periods in full time paid work gain maximum benefit. This presents problems for women, many of whom take substantial breaks from the paid workforce for the birth of children and often return to work on a part time basis as a result of their greater care giving role and the lack of access to, and cost of, quality child care. Statistics show that women, far more than men, tend to take longer periods out of paid employment mostly for family reasons.⁷⁹ While they are not in paid work, women generally are not entitled to contribute to superannuation although there are provisions for contributions to be made on their behalf.⁸⁰

7.59 While it is true that the participation rate of women in paid work has increased, large numbers continue to work on a casual or part time basis.⁸¹ Some of these women earn less than $450 per month, which is the income threshold below which employers are not bound to make contributions to a superannuation fund. Also, because women generally earn less than men, even when their work involves a similar level of skills,⁸² it follows that compulsory contributions set at a percentage of a person’s salary tends to be lower for women than for men. Recent AIFS research has found that women have five times less superannuation than men.⁸³

7.60 Other research also shows that women do not plan for their retirement because of differences in attitudes and in levels of information. Many women consider retirement planning to be the responsibility of their partner, particularly those who work part time or on a casual basis.⁸⁴ Even those who work full time expect to rely on their partner’s superannuation in retirement. In general women are less likely to receive information about retirement. Again this is particularly true for those who work on a part time or casual basis. Even those who do contribute to superannuation are less likely to know what their contributions are, how much they need to contribute or what their current entitlements are.⁸⁵

Access to information about superannuation

7.61 Research by the AIFS has found that both men and women generally knew very little about the other’s superannuation entitlement.⁸⁶ This was found to be more true for the women in the study than for the men,⁸⁷ which suggests that men and women do not have equal access to information about their spouse’s entitlement or have different levels of awareness of the potential importance of superannuation.⁸⁸ This has greater implications for those couples whose superannuation represents a significant proportion of their assets.⁸⁹ Consequently, there is a need for improved access to information for both spouses,⁹⁰ but more so for women. They are more likely to lack knowledge of their spouse’s entitlement and have a smaller entitlement themselves, making access to their spouse’s superannuation more important for an equitable settlement.

Disparate entitlements due to non-gendered factors

7.62 Although gender is an important factor influencing superannuation entitlements, it is by no means the only factor. There are numerous other factors which affect people’s entitlements to superannuation and which may explain differences in entitlements among persons of the same sex. These include income level, occupation and type of employment, age, date of separation, time spent out of the paid workforce and number of children. The primary factor is income level. The higher one’s salary, the greater the contribution is under compulsory superannuation laws and the greater propensity one has to make one’s own personal contributions to the account. The type of occupation and place of employment will also be relevant.⁹¹ Some employers or industries offer more lucrative schemes than others. Age affects a person’s entitlement to superannuation. Older people will usually have been in the paid workforce longer and thus will have been able to accrue more money in superannuation accounts. The introduction of compulsory employer superannuation contributions in the early 1990s began at the low level of 3% of the employee’s salary. However, the percentage that employers must contribute is now 8% and is to reach 9% in July 2002. So those separating later are likely to have accumulated more funds in superannuation than those who separate sooner.⁹²

7.63 Time spent out of the paid workforce, for further study for example, also affects the accumulation of superannuation entitlements. However, while it may shorten the time in the paid workforce, further study may also improve the person’s ability to get a better paying job and, consequently, to contribute more towards superannuation.

7.64 The number of children a person has negatively impacts on the superannuation entitlements of women only. The more children women have, the lower the value of their superannuation entitlements, and the higher the value of men’s. As Dewar, Sheehan and Hughes state, this “reflects the opportunity costs incurred by women in caring for children and perhaps the need for men to earn higher incomes to support larger families”.⁹³ New research published by the AIFS shows that women with one child lose about $162,000 or 37% of total lifetime earnings because of their decision to have a child.⁹⁴ While this is an improvement on the findings of previous research (which found that women with children could expect to earn lifetime incomes of $435,000 less than those without children),⁹⁵ the lost earnings still have a commensurate negative impact on accumulation of superannuation.

Should the court take into account the parties’ differential entitlements?

7.65 According to Kirby P, as he then was, in Green v Robinson, differential entitlements to superannuation, generally a result of the parties’ disparate income levels, must be taken into account. He considered that not taking these differences into account is as flawed as to disregard superannuation altogether. This is because:

Despite equal pay legislation, and industrial decisions to the same end, it is well known that in Australia, female earnings are typically lower than male earnings. Inherent in the notion that each “owns” the superannuation entitlements accumulated from his or her income, is an inescapable bias against vulnerable (usually female) members of a marriage or marriage-like relationship. This is a bias which the Act, far from condoning, forbids. By section 3(1), the Act requires, in relation to “de facto partners or either of them”, that the financial resources, which must be taken into account under section 20(1) of the Act, are to include entitlements under a superannuation scheme. This is therefore something which, in the exercise of the section 20(1) discretion, the Court must view as belonging not to Mr Robinson separately however he actually banks or notionally receives the contingent benefit, but to the financial resources of the parties which need to be adjusted, having regard to the contributions “made directly or indirectly” by them. Conformably with the language of the Act and applicable jurisprudence which has developed in the Family Court on analogous problems, it is my view that Ms Green made an indirect contribution to Mr Robinson’s superannuation entitlements. Just as he did to hers. The only difference is that his entitlement was more substantial. This was because of its longer duration and because of his higher base income.⁹⁶

Empirical research

7.67 Extensive research has been conducted by the AIFS over the past decade into the economic consequences of divorce for married couples. A part of this research has focused on the incidence, and treatment of, superannuation in financial settlements under the FLA. Unfortunately, there has been no similar empirical research into how superannuation has been treated in cases, both settled and litigated, under the PRA. However, it is highly likely that de facto couples equally face the problems experienced by divorced couples in relation to superannuation. In fact, de facto couples may be more adversely affected because of the narrower approach taken by the Supreme Court and the absence of s 75(2) factors in property orders under the PRA.

7.68 The major criticisms of the treatment of superannuation on divorce, highlighted by the AIFS studies, are that superannuation is still largely ignored in property settlements under the FLA and that this has a deleterious impact on the share of property awarded to the non-contributor. Even when superannuation is taken into account, the court has failed to develop principles to deal with superannuation consistently and equitably.⁹⁸

Superannuation still largely ignored

7.69 Despite the increasingly significant part superannuation plays in the total asset wealth of the parties, research suggests that superannuation is still largely ignored in property proceedings under the FLA.⁹⁹ The recent research by the AIFS found that superannuation was taken into account in less than half (46%) of property settlements under the FLA despite the fact that over 80% of respondents reported that one or both of them had superannuation entitlements. This indicates little improvement since the Settling Up study, which was conducted by the AIFS in the mid 1980s. The Settling Up study found that superannuation was taken into account in only 32% of cases involving younger divorcees, and 46% of cases involving older couples,¹⁰⁰ largely because parties had not even been advised by their lawyers of its relevance.¹⁰¹

Reduces non-contributor’s share of family assets

7.70 The Settling Up study also found that the parties’ share of the family assets was greatly affected by whether superannuation was included in the general pool of assets. Where it was included, the survey found that women received a lower share of the total assets (between 45% to 55% lower).¹⁰² In general, the study found that women received a greater share of the basic assets – namely, bank accounts, house, car and furniture – while men received a greater share of the non-basic assets defined as businesses, farms and superannuation. These findings have been replicated in the more recent AIFS research. While women receive two-thirds of the basic assets such as the home and car, they received only one-fifth of the non-basic assets, which include superannuation, businesses and farms.¹⁰³

FAMILY LAW LEGISLATION AMENDMENT (SUPERANNUATION) ACT 2001 (CTH)

7.71 The Commonwealth is set to implement a radical new approach to the way in which superannuation is treated on divorce. The proposals have garnered a lot of interest and support from a range of interest groups.¹⁰⁴ The Family Law Superannuation Act which was introduced in the Commonwealth Parliament in April 2000, was passed in June 2001.¹⁰⁵ When it becomes operative, it will redefine superannuation as property for the purposes of property claims under the Act. This will allow separating couples to divide their entitlements to superannuation in the same way as they can divide their other assets. That is, superannuation interests will be treated as a form of property capable of division under s 79 of the FLA, and not just as a financial resource.¹⁰⁶

7.72 The Family Law Superannuation Act provides for parties to make agreements relating to their superannuation interests. These superannuation agreements can be incorporated into financial agreements which have now become operative pursuant to the recently enacted Family Law Amendment Act 2000 (Cth).¹⁰⁷ Where people are unable to agree, the court will be given power to split the value of superannuation as part of a property settlement. The Act will also provide more precise methods for the valuation of superannuation interests by regulation.

Objectives of amendments

7.73 One of the Act’s major objectives is to overcome the uncertainty that the current approach has produced. It gives separating couples and the court more choice in dealing with superannuation interests. By providing legislative guidelines for the valuation of superannuation interests, it also gives parties (and courts) a tool with which they can assess their interests with more certainty. The various actuarial tables that will be used by the parties and the court in relation to defined benefit interests will be included in the Family Law Regulations although there is also provision for the trustee of funds to have their own specific calculations approved by the Australian Government Actuary in appropriate cases.

7.74 The Act also promotes several of the Commonwealth Government’s other objectives. First, it is part of the Government’s broader push to encourage parties to take responsibility for their own affairs. This is to be achieved by enabling separating couples to make binding agreements on how their superannuation interests are to be divided. Superannuation agreements will be binding on the parties in the same circumstances as financial agreements under the Family Law Amendment Act 2000 (Cth) and are accordingly subject to the same procedural requirements.¹⁰⁸

7.75 Secondly, the Act is intended to be consistent with the Government’s broader retirement incomes policy goals. These include making sure that all employees are able to provide a financially secure retirement for themselves and for their dependants. The Explanatory Memorandum accompanying the Bill explicitly recognises that the Government’s Age Pension outlays will be lower in the long term if parties are permitted to split superannuation interests upon marriage breakdown.

7.76 The stated objectives of the Act are that:

• superannuation should be clearly recognised in the division of marital property;
• there should be clear rules for valuing superannuation interests;
• parties should be encouraged to settle their own affairs and have full information to do so;
• it should be consistent with the government’s broader retirement incomes policy; and
• arrangements need to minimise complexity and cost and take into account the features of the superannuation fund involved.¹⁰⁹

7.77 The amendments are premised on two new concepts: “splitting” and “flagging”. The Family Court will be able to order, and parties will be able to agree, that a member spouse’s superannuation interest be split. This will only ever be possible if the superannuation interest is a “splittable payment”. What is and what is not a splittable payment will be determined under the forthcoming amendments to the Family Law Regulations. Whenever the splittable payment becomes payable, the non-member spouse will become entitled to the amount calculated in accordance with the Regulations or as agreed by the parties in the superannuation agreement.

7.78 The Family Law Superannuation Act allows the parties to give the trustee an agreement (or the court to give an order) which requires the trustee to establish a “base amount” equal to the amount agreed to be paid to the non-member spouse. The non-contributing spouse’s interest will be “carved out” of the contributing spouse’s interest and attracts interest at a prescribed rate until the member’s benefit is payable. The non-contributing spouse has the same rights to annual statements and other appropriate information while the base amount is growing with interest in the fund. Payment is made when the member spouse meets a condition of release. The non-member spouse is not a member of the fund.

7.79 The Family Law Superannuation Act has also amended the Superannuation Industry (Supervision) Act 1993 (Cth) (“the SIS Act”). This amendment makes it possible for people with an accumulation interest (and the majority of people are in accumulation type funds) to achieve a clean break. The non-member spouse will not have to wait until the member satisfies a condition of release to have their share of the interest paid into their own account. In cases where the superannuation interest is in an accumulation interest, a split to a new account or fund for the non-member is possible and relatively simple. Once an agreement is reached or an order made, the trustee can transfer the agreed “base amount” and any interest from the member’s account to a new account in the non-member spouse’s name. There is also provision for trustees, in schemes such as employer-sponsored funds where it is not possible to create a separate account for a non-employee, to transfer the interest to a separate superannuation fund nominated by the non-contributor spouse or, if no nomination is made, to an eligible roll-over fund.

7.80 Splitting superannuation interests held in a defined benefit scheme is more complex. It is not possible to move the non-member’s interest out of the fund until the member’s benefit is payable. The value of the member’s superannuation interest is calculated using factors in the Regulations developed by the Australian Government Actuary. The parties or the court then decide what part of that amount is to be given to the non-member spouse and this becomes the “base amount”. As outlined above, this base amount remains in the defined benefit fund but is allotted to the non-member spouse. Interest is credited on it until the member satisfies a condition of release (that is, either retires, resigns or dies) at which time the non-member spouse is paid the base amount plus any interest and the member-spouse receives the remainder of the total benefit.

7.81 Central to the notion of splitting is the ability to value the total member’s benefit to be split. The overall value of an accumulation fund is easy to determine, as it is the amount in the member’s account. Valuation of a defined benefit is calculated using factors in a table in the Regulations or scheme-specific factors approved by the Australian Government Actuary. There will be cases where the amount finally received by the member in a defined benefit scheme is less (or more) than the amount of the valuation (for example where the assumptions used in the valuation factors are not met). The amount paid out to the member and the non-member can never exceed the total amount that is payable to the member. The trustee will always pay the non-member’s base amount plus interest first.

7.82 All superannuation interests that are split and allotted to the non-member spouse are preserved until retirement age. This is in keeping with the Government’s retirement incomes policy. Also, where one of the parties dies before a payment split becomes payable, the splitting order or agreement will continue to operate in favour of, and be binding on, the legal personal representative of the deceased spouse.

7.83 There was a concern that the new amendments would remove the possibility of a party trading off their interest in the other party’s superannuation in order to get a bigger share of other assets. This is particularly important for women concerned more with housing for themselves and their children than long-term financial security in retirement.¹¹⁰ Under the new legislation the court is authorised to order that parties trade their interests in superannuation instead of splitting the fund, if splitting the fund would have the effect of having to sell the matrimonial home.¹¹¹

Ali, 38 and Jordan, 40 met at university and have been married for 15 years. They have 3 children, aged 11,8, and 6. Ali has her hands full raising the children and taking care of all the household chores. She also works part time in a bookstore. Jordan has been in full time employment in the public sector since leaving university and is now in middle management. Jordan has at least $98,000 in a defined benefit state superannuation scheme and Ali has about $5,000. They still owe $150,000 on their home, which was recently valued at $300,000. The relationship ends and they cannot agree on how to divide their property. If Ali waits for the new amendments to come into effect, she could seek an order that Jordan’s superannuation interests be split so that she would receive her share of his superannuation when it becomes payable. But this is not likely to happen for another 15 years. Ali prefers to trade off her interest in his superannuation in order to secure the matrimonial home, unencumbered, and also receive a lump sum payment from Jordan. She will continue to be able to do this even when the new arrangements come into effect.

Flagging superannuation interests

7.84 The Act also allows for the “flagging” of superannuation interests. When a superannuation interest is flagged, either by agreement or by court order, the trustee is prevented from dealing with the interest until the flag is lifted. This effectively defers the division of the superannuation interest. It is expected that this may be a preferred method when the superannuation interest is likely to be paid out soon at which time the actual value of the interest will become known. The flag can be lifted either by a court order or by a flag-lifting agreement made by the parties. It is a penalty to fail to comply with payment flags and trustee who does so can be fined.

Agreements

7.85 Parties will be able to make superannuation agreements that specify how superannuation is to be divided on marriage breakdown. This provision is linked to other recent amendments, which now allow married couples to make binding financial agreements either before or during their marriage or after separation. Superannuation agreements will be enforceable in the same way that general financial agreements are enforceable. They will thus need to comply with the procedural requirements as set out in s 90B-s 90G of the FLA.¹¹²

7.86 Couples may, by agreement, split their superannuation interests in one of three ways. They can:

• use the actuarial method provided in the Regulations to determine the value of the interest and then identify a percentage for the purpose of the split; or
• identify a percentage; or
• identify an amount to be transferred rather than a percentage.

7.88 The Act requires that the parties present the trustee with a “separation declaration” that conforms with certain requirements. Parties whose superannuation interests are less than the prescribed amount (the eligible termination payment (ETP) tax-free threshold pursuant to s 159SG of the Income Tax Assessment Act 1936 (Cth)) need only provide a written declaration that their marriage has broken down, signed by at least one of the spouses. On the other hand, parties with superannuation interests greater than the ETP tax-free threshold need to provide a more formal declaration.

7.89 The requirements for a separation declaration are consistent with the grounds for dissolving a marriage under s 48 of the FLA, that is, that the parties have separated and lived separately and apart for a continuous period of at least 12 months. Again, only one of the parties needs to have signed the declaration for it to be effective (s 90MP).

7.90 Importantly, the Act gives the court power to make orders to enforce a superannuation agreement.¹¹³ The court will be able to use this power in cases where the trustee does not comply with the provisions of a superannuation agreement or where one of the parties attempts to sidestep the agreement.

Court orders

7.91 Where the parties have not made a binding superannuation agreement, the Family Court will be able to make orders either splitting or flagging their superannuation interests. As these orders will be made in the context of property alteration proceedings under s 79, the court will only be able to make them if it is just and equitable in the circumstances of the case.

7.92 Under proposed s 90MT(1), the court may make an order which effectively entitles the non-member spouse to a certain amount when the splittable superannuation interest becomes payable. There will be a corresponding reduction in the member’s entitlement to superannuation under that superannuation plan. Before making a splitting order, the court will be required to determine the overall value of the superannuation interest in accordance with the Regulations, and allocate a base amount to the non-member spouse.

7.93 It will also be open to the court to make flagging orders in relation to superannuation interests, directing the trustee not to deal with the superannuation without the leave of the court. Section 90MU(2) guides the court in determining when it will be appropriate to make a flagging order. It states that the court must take into account whether the superannuation interest is likely to become payable in the near future. It may take into account any other matters it considers relevant. This gives the court a discretion similar to that currently in s 79(5) of the FLA which allows the court to adjourn the consideration of property interests to a later date. Flagging orders are envisaged to be most appropriate in circumstances where a condition of release (such as retirement) is imminent.

Information to parties

7.94 One of the major problems facing separating couples is obtaining information about the other partner’s superannuation entitlements. Under the FLA at the moment, if parties do not agree to give information about their superannuation entitlements to the other, they must apply for a subpoena to be issued requiring the information to be provided. There is a specific form available from the Family Court for this.¹¹⁴

7.95 In order to facilitate an informed decision in property settlements or orders, the Act will allow spouses to ask trustees for information about their partner’s superannuation interest. Trustees, in turn, will be authorised and in fact, required to give full information about the member’s account to the non-member spouse on specific request. Trustees who disclose information, which they are authorised to disclose, will not be in contravention of any privacy provision.¹¹⁵

Other significant provisions

7.96 Section 90MB provides that the new Part VIIB of the FLA will override any other laws, trust deeds or the like, whether made before or after the commencement of the new regime, that prevent the division of superannuation. It provides that superannuation interests will be able to be divided on the separation of the parties to a marriage despite any contrary intentions expressed in other legislation, trust deed or any other law of the Commonwealth or State or Territory. This is a clear expression of the Commonwealth’s intention to cover the field in respect of the division of superannuation interests between married couples on separation. Section 90MB(2) protects the trustee in that it provides that anything that the trustee does in compliance with s 90MB(1), which is contrary to the governing rules of the superannuation fund, will not be treated as a contravention.

Overseas jurisdictions

United Kingdom

7.97 Under legislation introduced in July of 1996, UK courts are empowered to split the pension plans of separated couples. Sections 25-26 of the Matrimonial Causes Act 1973 (UK) allowed couples to seek an order that either the income or the tax free lump sum available on retirement be paid to other spouse. The provisions have not been popularly received because of the potentially extended delay before payment is made. The legal and administrative costs involved in securing such an order also have a prohibitive effect.

7.98 A new system of pension sharing began on 1 December 2000 under the Welfare Reform and Pensions Act 1999 (UK). Under the new arrangements, the value of the pension entitlements can be divided on divorce or nullity of marriage for the benefit of the other spouse,¹¹⁶ termed a pension sharing order.¹¹⁷ In making such orders the court is to have regard to any benefits under a pension arrangement which a party to the marriage has or is likely to have (whether or not in the foreseeable future), and any benefits under a pension arrangement which, by reason of the dissolution or annulment of the marriage, a party to the marriage will lose the chance of acquiring. This has made it easier to pursue the clean break principle as pensions, the matrimonial home and other assets can be split on divorce.

Canada

7.99 In Canada, provincial laws govern the division of property on relationship breakdown while federal laws govern the division of pension plans. The Canada Pension Plan Act 1985 allows for the division of unadjustable pension earnings between spouses and common law partners on relationship breakdown.¹¹⁸ Either party may apply for a division, however the parties must have lived together for 36 months during the marriage or relationship for the application to be approved.¹¹⁹

7.100 On separation or divorce, s 55 allows each of the partners to apply for an equal division of the pension entitlements that each accumulated during the relationship. Entitlements are calculated by adding together the unadjusted pensionable earnings for each party (only the earnings made during cohabitation are counted).¹²⁰ This figure is then divided equally and payed to each party.¹²¹

7.101 This provision effectively adopts the same view as the provincial schemes for the division of matrimonial property namely that marriage is an equal partnership in which partners contribute equally to the accumulation of wealth during the course of the relationship thus entitling them to equal shares of that wealth upon relationship breakdown.¹²²

7.102 Division of pension entitlements is mandatory following the granting of a divorce, or a judgement of nullity of the marriage; on the application of either spouse if the spouses have been living separately for a year or more; or if one of the parties has died and the parties had been living apart for more than a year.¹²³

New Zealand

7.103 The Property (Relationships) Act 1976 enables the court to make orders to ensure that both spouses and de facto partners receive their appropriate share of a superannuation scheme entitlement on separation. Superannuation is included within the definition of relationship property under s 8(1)(i) of the Act. That proportion of the value of any superannuation scheme entitlements that is attributable to the marriage or de facto relationship¹²⁴ is relevant in property proceedings under the Act. If partners do not want this to apply, they may enter into an agreement to contract out of the provisions of the Act.

OPTIONS FOR REFORM

7.104 The position paper on superannuation and family law, prepared by the Commonwealth Attorney General’s Department, acknowledged the constitutional limitations on the Commonwealth to extend its proposed reforms to de facto couples. However, it also encouraged States and Territories to use the Commonwealth system as a model for adoption in relation to de facto couples.¹²⁵ Since then, however, it appears that the Commonwealth has increased pressure on the States and Territories to refer their powers over the resolution of financial matters between de facto couples post separation to the Commonwealth.

Option 1: Reference of powers

7.105 At recent meetings of the Standing Committee of Attorneys General, the Attorneys General of all the States and Territories have discussed referring their powers over de facto relationships to the Commonwealth. Media reports noted that the Commonwealth Government sought only to take over legislative responsibility for heterosexual de facto couples. State and Territory Attorneys General are opposed to the non-inclusion of same sex de facto and other close personal relationships, seeing this as a retrograde step.¹²⁶ The Commission understands that discussions between the Commonwealth and State Attorneys General will continue.

7.106 The Commission considers that it is unfair for persons in de facto relationships to have inferior rights to their married counterparts. A referral of powers to the Commonwealth, in the light of the current discussions, would be beneficial for heterosexual de facto couples. However, the Commission considers that all couples regardless of sexual orientation should have equal rights. For this reason, the Commission would be wary of recommending that this State’s powers over de facto relationships be referred to the Commonwealth unless there was a commitment to extend protection to the groups covered by the PRA.

Option 2: Parallel laws

7.107 New South Wales also has the option of adopting parallel laws based on the FLA amendments.

Support for parallel laws

7.108 There is broad support for the thrust of the Commonwealth reforms. The superannuation industry supports it. ASFA, which represents the superannuation industry, has consistently argued for the removal of discriminatory provisions between married and non-married couples, including the removal of discrimination against same sex couples.

7.109 Women’s groups are also generally supportive of the amendments. Their two major concerns are that women ought still be able to trade off their interest in their partner’s superannuation in order to secure housing for themselves and their children. There is a particular emphasis on keeping the family home. According to the National Network of Women’s Legal Services, the family home provides women with both economic and emotional security. It is important that any changes to the way that superannuation treated does not jeopardise the ability of women to trade off their entitlement to their partner’s superannuation in order to secure the family home.¹²⁷ This is one of the reasons why there was not support for an automatic 50/50 split of superannuation interests.¹²⁸ The new provisions do not prevent trading off. Nor do they limit the amount to be considered for any split.

7.110 The National Network of Women’s Legal Services suggested that trustees be prevented from disclosing the address of the member or non-member spouses to the other party, to ensure that women and children fleeing from violent situations were protected. This concern has been addressed in the legislation.¹²⁹

Can NSW adopt the same laws relating to superannuation?

7.111 Although NSW does not face the same constitutional difficulties that beset the Commonwealth in relation to binding third parties¹³⁰ or of not being able to acquire property other than on just terms,¹³¹ there may be problems with s 109 of the Commonwealth Constitution. This states that when a law of a State is inconsistent with a law of the Commonwealth, the law of the Commonwealth prevails and the law of the State will become invalid to the extent of the inconsistency.¹³² As any uniform law adopted by NSW will extend to same sex couples and persons living in close personal relationships, who come within the scope of the PRA, it is possible that inconsistencies may arise between those provisions and other Commonwealth laws (for example, taxation laws), which may invalidate the NSW provisions. The test is whether the Commonwealth intended to cover the field, that is, regulate an area completely and exhaustively. If the Commonwealth does intend to cover the field, any State law that attempts to regulate a part of that subject matter will be invalid. In the present context, the express mention of the Commonwealth’s intention to cover the field of splitting superannuation interests on relationship breakdown applies only to married persons under the FLA.

Option 3: Retain status quo

7.112 This is the third and least preferred option. It would perpetuate the unfairness of the current requirement of proof of contributions. In fact, in view of Commonwealth reforms to the FLA, doing nothing means increasing the extent to which people in de facto relationships have inferior rights as compared to married persons.

ISSUE 28

Which is the preferable option for dealing with superannuation entitlements on the breakdown of de facto or close personal relationships. Why?

1. There are two types of superannuation schemes. The first is a defined benefit scheme, which usually provides members with a final benefit (either in the form of a lump sum or pension or combination of both) dependent on a range of factors including years of service, salary on retirement, contributions and earnings. The other type of fund is an accumulation fund where the benefit is related directly to contributions to the fund plus earnings. See Commonwealth Attorney General’s Department, Superannuation and Family Law: A Position Paper (AGPS, Canberra, 1998) at 21.

2. Green v Robinson (1995) 36 NSWLR 96.

3. The failure of the Master at first instance to give any consideration to the parties’ superannuation entitlements was a clear error of law and justified allowing the appeal: see decision of Kirby P in Green v Robinson (1995) 36 NSWLR 96.

4. Chapman v Chapman (NSW, Court of Appeal, No 40637/89, 9 September 1991, unreported); Green v Robinson; Molina v Fajwal (1994) 17 Fam LR 512 (Cohen JA); Keene v Harkness (1997) DFC 95-179 (Cohen JA).

5. The Family Law Legislation Amendment (Superannuation) Act 2001 (Cth) will commence in December 2002. The amendments are discussed at para 7.71-7.96.

6. Crapp v Crapp (1978) 21 ALR 245 (Fogarty J). But see also Evans and Public Trustee for the State of Western Australia (1991) FLC 92-223 and J Dewar, G Sheehan and J Hughes, Superannuation and Divorce in Australia (AIFS, Melbourne, 1999) at 4.

7. Under the current regime, the Family Court has a discretion under s 75(2)(b) to take into account the parties’ income, property and financial resources and, under s 75(2)(f), either party’s eligibility for a pension, allowance or benefit under any Australian or foreign law or under any superannuation scheme. Alternatively, it could take superannuation into account under the catch-all provision in s 75(2)(o).

8. Crapp v Crapp (1978) 21 ALR 245 (Fogarty J). Coulter and Coulter (1989) 96 FLR 375 (Full Court).

9. Harris v Harris (1991) FLC 92-254 at 78,709 (Full Court).

10. Wunderwald v Wunderwald (1992) 106 FLR 138; Stay v Stay (1997) 138 FLR 43.

11. McGrath v Ter Hedde [1999] NSWSC 1192 discussed at para 7.25.

12. See para 7.77-7.83 for a detailed examination of the amendments.

13. De Facto Relationships Act 1996 (SA) s 3.

14. Commonwealth Attorney General’s Department, Superannuation and Family Law: A Position Paper (AGPS, Canberra, 1998) at 79. See also Commonwealth Attorney General, “Commonwealth Calls For States To Refer Power To Legislate on Property for De Facto Couples” (News Release, 25 July 2001).

15. PRA s 20(1).

16. See para 7.7.

17. See para 7.42.

18. Green v Robinson (1995) 36 NSWLR 96 at 106-112.

19. Green v Robinson (1995) 36 NSWLR 96 at 112-121. This approach was followed in Campbell v Campbell (1995) DFC 95-162.

20. See for example, Fowler v Zoka [2000] NSWSC 1117. Superannuation was not taken into account in the adjustment process, despite the fact that the plaintiff’s superannuation entitlements grew from some $800 to $8,000 during the period of the relationship because the Master found that there was no clear evidence that the defendant contributed to the increase.

21. Fotheringham v Fotheringham (NSW, Supreme Court, No 4161/94, 19 November 1996, unreported).

22. De Jong v Walter (NSW, Supreme Court, No 3444/94, Macready M, 19 September 1996, unreported). However, the plaintiff’s claim was not based solely on homemaker contributions. Although she was not working, the plaintiff was in receipt of an invalid pension, some $26,000 of which was put towards the mortgage of the house that they lived in together. She also received an inheritance, almost $20,000 of which was spent during the relationship on furniture, personal expenses and joint household purposes.

23. In this case the amount of the defendant’s superannuation still in a policy totalled approximately $10,000. However, $10,500 had been released from one fund shortly before separation, and a further $12,000 shortly after. No mention was made of the plaintiff’s superannuation, which makes it doubtful that she had any at all.

24. See for example, Anderson v Charlton (NSW, Supreme Court, No 1719/96, Macready M, 6 August 1998, unreported); Jackson v Jackson [1999] NSWSC 229 (Macready M); Williamson v Birch [2001] NSWSC 36.

25. Anderson v Charlton (NSW, Supreme Court, No 1719/96, Macready M, 6 August 1998, unreported).

26. Jones v Martin [2000] NSWSC 1112 (Macready M).

27. Simpson v Barker [1999] NSWSC 165 (McLaughlin M). The male partner’s superannuation entitlement had grown from $18,500 to almost $141,000 during the relationship. Although the Master rejected her submission that she had contributed indirectly to his superannuation he did concede that it was appropriate to deduct the defendant’s personal contributions to his superannuation from his general financial contributions to the parties’ joint endeavours.

28. The decision in Dwyer v Kaljo (1987) 11 Fam LR 785 was the precedent at the time. See Chapter 5 at para 5.23-5.26 for a discussion of this case.

29. Blonk v Welch (NSW, Supreme Court, No S2488/94, Macready M, 7 November 1995, unreported).

30. With whom Stein JA agreed; Powell JA dissenting.

31. Gazzard v Winders (1998) 23 Fam LR 716. The Court of Appeal overturned the decision at first instance where the Master had held that the fact that the parties used their income for the joint purposes of the relationship did not satisfy the requirements of the majority decision in Green v Robinson (1995) 36 NSWLR 96.

32. Bennett v Parker (2000) 27 Fam LR 8.

33. McGrath v Ter Hedde [1999] NSWSC 1192 at para 36 (Macready M).

34. See para 7.10. Stay v Stay (1997) 138 FLR 343; Wunderwald v Wunderwald (1992) 106 FLR 138; McGrath v Ter Hedde [1999] NSWSC 1192.

35. See para 7.10.

36. See for example, Campbell v Campbell (1995) DFC 95-162. In this case, the defendant received his superannuation entitlement shortly after the relationship (of 2 and a half years) ended. It constituted about $54,400 of a termination package from his employer of $290,000. The Master found that the applicant was not entitled to any interest in the defendant’s superannuation entitlement because he had been contributing to it for some 24 years before they met. He found that the relationship in no way helped the defendant to continue to contribute to the superannuation fund. The majority of the entitlement (almost $38,000) had been accrued before they began their relationship: at 77,359 (McLaughlin).

37. Green v Robinson (1995) 36 NSWLR 96. See also Lipman v Lipman (1989) 13 Fam LR 1. Contrast In the Marriage of Gill (1984) 9 Fam LR 969 (both of these cases referred to in Green v Robinson). See also discussion at para 7.15-7.16.

38. Green v Robinson (1995) 36 NSWLR 96. An example of where the amount of superannuation included in the adjustment was proportional to the length of the relationship is De Jong v Walter (NSW, Supreme Court, No 3444/94, Macready M, 19 September 1996, unreported). But see the contrary opinion In the Marriage of Gill (1984) 9 Fam LR 969.

39. Burke v Burke (1992) 112 FLR 250 (Fogarty J).

40. Gazzard v Winders (NSW, Supreme Court, No 3054/95, Macready M, 12 December 1996, unreported).

41. Gazzard v Winders (Macready M).

42. Green v Robinson (1995) 36 NSWLR 96 (Powell JA).

43. Commonwealth Attorney General’s Department, Superannuation and Family Law: A Position Paper (AGPS, Canberra, 1998) at para 8.3.

44. Commonwealth Attorney General’s Department, Superannuation and Family Law: A Position Paper (AGPS, Canberra, 1998) at para 8.3.

45. Superannuation Industry (Supervision) Amendment Regulations 1999 (No 3) (Cth) reg 6.17A(3).

46. K Funder, M Harrison and R Weston, Settling Down: Pathways of Parents after Divorce (AIFS, Melbourne, 1993) at 69.

47. See para 7.61.

48. Dewar, Sheehan and Hughes at 19 (see Table 4.4). Median superannuation constituted about 20% of the total median assets of low asset marriages (ie those with assets below the DSS assets test threshold of $268,500), in comparison to 14% of medium asset marriages and only 8% of high asset marriages.

49. The Act was assented to on 28/6/2001. Commonwealth, Government Gazette No 31 of 8 August 2001 at 2203.

50. Crapp and Crapp (1979) 24 ALR 671; Coulter and Coulter (1989) 96 FLR 375.

51. In Wunderwald v Wunderwald (1992) 106 FLR 138, the Family Court said that whether or not superannuation is property depends on a consideration of the relevant statute or private instrument under which the fund was created. In that case, the husband and wife had a private superannuation fund which the court considered an asset because it was clearly a creature of both or one of them and it was relatively easy to work out the parties’ respective entitlements. Furthermore, there was no evidence to suggest that either party would suffer disadvantage if one or both parties realised their entitlements. This was followed by the Full Court in Stay v Stay (1997) 138 FLR 343.

52. Hauff and Hauff (1986) FLC 91-747 at 75,441.

53. Hauff and Hauff (1986) FLC 91-747 at 75,441.

54. In the Marriage of Bailey (1978) 20 ALR 199 at 206 (Evatt CJ and Murray J).

55. Hauff and Hauff (1986) FLC 91-747 at 75,441. This latter concept seems to have been adopted in a recent decision under the NSW Act where the Supreme Court conceded that voluntary contributions towards a party’s superannuation fund reduced that person’s financial contribution to the other relationship property: see Simpson v Barker at para 7.20.

56. See Wunderwald v Wunderwald (1992) 106 FLR 138. This case appears to have disproved the theory that a husband’s substantial superannuation entitlements accumulated during the marriage could be left untouched where the wife’s future needs for long term financial security were met from other sources. As one commentator has noted, that case “demonstrates that the wife’s entitlement in such cases is contribution driven and not simply a question of needs”: M Watt, “Apportionment of Super Entitlements” (1993) 28(3) Australian Lawyer 52 at 53.

57. In the Marriage of West and Green (1991) 114 FLR 74 (Kay J).

58. For this purpose, the court has developed different ways of valuing superannuation interests: see for example, In the Marriage of West and Green; In the Marriage of Harrison (1996) 129 FLR 74.

59. In the Marriage of Mitchell (1995) 120 FLR 292.

60. ALRC, Equality Before the Law; Justice for Women Part 1 and Women’s Equality Part 2 (Report 69, 1994); ALRC, Matrimonial Property (Report 39, 1987); ALRC, Collective Investments: Other Peoples Money (Report 65, 1993). See also Australia, Parliament, Joint Select Committee on Certain Aspects of the Operation and Interpretation of the Family Law Act, Family Law Act 1975: Report of the Joint Select Committee on Certain Aspects of the Operation and Interpretation of the Family Law Act (AGPS, Canberra, 1992).

61. Commonwealth Attorney General’s Department, Superannuation and Family Law: A Position Paper (AGPS, Canberra, 1998).

62. Commonwealth Attorney General’s Department, Superannuation and Family Law: A Position Paper (AGPS, Canberra, 1998).

63. Australian Prudential Regulation Authority, Superannuation Trends (March Quarter 2001) available at «www.apra.gov.au».

64. Australia, Department of Treasury, Retirement Income Modeling Unit, J Tinnion and G Rothman, “Retirement Income Adequacy and the Emerging Superannuation System” paper presented to the Seventh Colloquium of Superannuation Researchers (University of Melbourne, 8-9 July 1999).

65. Employers must, in 2001, contribute at least 8% of an employee’s gross salary to a complying superannuation fund for the benefit of that employee. This will increase to the current maximum agreed percentage of 9% in July 2002. Employers who do not make the compulsory minimum contributions are required to pay a tax, called the Superannuation Guarantee Charge (SGC), which is equal to the contributions which have not been paid plus interest and a component for administration costs. Any SGC collected by the Tax Office (less the administration component) is paid to a superannuation fund nominated by the employee.

66. Coverage outside the compulsory regime is lower. For example, 37% of owner managers of unincorporated enterprises (self-employed) have no superannuation, despite the tax breaks available for contributions. See Australian Bureau of Statistics, Employment Arrangements and Superannuation (Cat No 6361, March 2001).

67. ASFA, “What are retirement savings accounts (RSAs)” (Fact Sheet 15) available online at «http://www.superannuation.asn.au/ super/rpm.cfm?page=wis15». “Spouse” is defined as a married couple or a de facto couple, but it is unclear whether this includes same sex couples.

68. Australia, Department of Treasury, Retirement Income Modelling Unit, B Bacon, HHousehold Wealth and the Aged: An Income Distribution Survey Analysis (AGPS, Canberra, 1998) at 4.

69. S Bordow and M Harrison, “Outcomes of Matrimonial Property Litigation: An Analysis of Family Court Cases” (1994) 8 Australian Journal of Family Law 264.

70. Dewar, Sheehan and Hughes at 17.

71. Dewar, Sheehan and Hughes at 11, comparing the earlier AIFS findings in the 1980s: see P McDonald, Settling Up (AIFS, Melbourne, 1986) at 176.

72. J Onyx and A Watkins, “Why women do not plan their retirement” (ASFA, Research Paper 2, 1996) at 4.

73. ABS, Australian Social Trends (Cat No 4102.0) at 108.

74. ASFA, “Women Doubly Handicapped on Super” (Media Release, 10 July 2001).

75. ASFA Research Centre, Ross Clare, Women and Superannuation (July 2001) at 8.

76. See, for example, Australia, Human Rights and Equal Opportunity Commission, Sex Discrimination Commissioner, Superannuation and the Sex Discrimination Act: Current Status and Future Directions (AGPS, Canberra, 1994).

77. Australia, House of Representatives Standing Committee on Legal and Constitutional Affairs, Half Way to Equal: Report of the Inquiry into Equal Opportunity and Equal Status for Women in Australia (AGPS, Canberra, 1992) at 97. Similar examples are found in ASFA Research Centre, Ross Clare, Women and Superannuation (July 2001) at 4.

78. A Horin, “Women left behind in super stakes” Sydney Morning Herald (5 July 2001) at 6.

79. See, for example, ABS, NSW men and women: balancing work and care (Cat No 4903.1, Media Release, 2000).

80. See para 7.19-7.20.

81. ABS, Australian Social Trends (Cat No 4102.0) at 108.

82. ABS, Australian Social Trends (Cat No 4102.0) at 151. Table entitled “Average hourly earnings in main job of employees, August 1999” shows that the female to male earnings ratio is 0.89. See also Seventeenth Select Committee Report on Superannuation, Super and Broken Work Patterns (November 1995) at 13-15.

83. Women’s superannuation entitlements were found to have a median value of $5,590 compared to men’s $26,152: see Dewar, Sheehan and Hughes at 13. On the other hand, Treasury estimates suggest that in 1994 the average superannuation entitlement was $17,000 for women compared to $42,000 for men. Treasury projections for 2004 are $40,000 for women and $74,000 for men: Department of the Treasury, Retirement Income Modeling Task Force, G Rothman, “Aggregate and Distributional Analysis of Australian Superannuation using the RIMGROUP Model” paper presented to the Colloquium of Superannuation Researchers (University of Melbourne, July 1996).

84. J Onyx and A Watkins, “Why women do not plan their retirement” (ASFA, Research Paper 2, 1996) at 12.

85. Onyx and Watkins at 12. See also A Horin, “Divorced women face lean old age” Sydney Morning Herald (Weekend Edition 30 June/1 July 2001) at 1 and 10.

86. Dewar, Sheehan and Hughes at 13.

87. Dewar, Sheehan and Hughes at 13 (Table 2.2). Similar findings were reported in ALRC, J Swartzkoff and C Rizzo, A Survey of Family Court Property Cases in Australia (1985). See also Onyx and Watkins at 7 and ARLC, Matrimonial Property (Report 39, 1987).

88. Dewar, Sheehan and Hughes at 13.

89. Dewar, Sheehan and Hughes at 13.

90. Dewar, Sheehan and Hughes at 13.

91. Dewar, Sheehan and Hughes at 14.

92. Dewar, Sheehan and Hughes at 14.

93. Dewar, Sheehan and Hughes at 15.

94. M Gray and B Chapman, “Foregone earnings from child-rearing: changes between 1986 and 1997” (2001) 58 Family Matters 4 at 8.

95. Gray and Chapman at 9.

96. Green v Robinson (1995) 36 NSWLR 96 at 103.

97. See for example, Anderson v Charlton (NSW, Supreme Court, No 1719/96, Macready M, 6 August 1998, unreported). In this case, the parties had been in a de facto relationship for almost four years. There was a very marked disparity in their earning capacity: he earning an annual salary of over $100,000 as an accounts executive with McDonalds while she earned about $30,000 per annum as a secretary. In relation to superannuation, the Master found that because the parties were both working there was no evidence that one party contributed to the other’s superannuation and therefore it was inappropriate to make any adjustment having regard to their superannuation entitlements. This was despite the fact that because of the difference in their salaries, her entitlement (at the date of hearing) was about $13,000 and his was $58,000.

98. Dewar, Sheehan and Hughes; Commonwealth Attorney General’s Department, Superannuation and Family Law: A Position Paper (AGPS, Canberra, 1998) at 10.

99. Dewar, Sheehan and Hughes; ALRC, Matrimonial Property (Report 39, 1987) at para 126, 131, 137; P McDonald, Settling Up (AIFS, Melbourne, 1986) at 198-200.

100. McDonald at 199.

101. McDonald at 199.

102. According to women’s valuation of the shares: see McDonald at 182.

103. G Sheehan and J Hughes, Division of Matrimonial Property in Australia (AIFS, Research Paper 25, 2001) fig 2.3 at 16.

104. Support found in submissions by the Institute of Actuaries of Australia, Association of Superannuation Funds of Australia, National Network of Women’s Legal Services and Lone Fathers Association to the Senate Select Committee on Superannuation and Financial Services, Interim Report on the provisions of the Family Law Legislation Amendment (Superannuation) Bill 2000 (November 2000).

105. Following its introduction on 13 April 2000, the Bill was subsequently referred to the Senate Select Committee on Superannuation and Financial Services. This Committee reported on 6 March 2001. See Australia, Parliament, Senate Select Committee on Superannuation and Financial Services, Report on the Provisions of the Family Law Legislation Amendment (Superannuation) Bill 2000 (AGPS, Canberra, 2001).

106. This proposal has been recommended on many previous occasions. In 1992, the Joint Select Committee on Certain Aspects of the Operation and Interpretation of the Family Law Act recommended, inter alia, that superannuation entitlements be legislatively included as property and that the Family Court be empowered to order that a superannuation entitlement be split and shared between the contributing and non-contributing spouse. A “split benefit” approach was also endorsed by the Australian Law Reform Commission, Collective Investment Schemes: Superannuation (Discussion Paper 40, 1992).

107. See Chapter 4.

108. See Chapter 4 at para 4.45-4.46.

109. Prime Minister of Australia, John Howard, Assistance to Women (Media Release, 8 March 1998).

110. Women’s Legal Service, Brisbane, Submission in Response to Superannuation and Family Law – A Position Paper of the Commonwealth Attorney’s General’s Department (August 1998). See also K Dunn, “Splitting the Difference: Superannuation Equality and Family Law” (1998) 12(3) Australian Journal of Family Law.

111. Dunn at 233.

112. See Chapter 4 at para 4.45-4.59 for a detailed discussion of the requirements under the FLA in relation to binding financial agreements.

113. FLA s 90MR.

114. Available on its website «www.familycourt.gov.au».

115. FLA s 90 MZB.

116. Matrimonial Causes Act 1973 (UK) s 21.

117. Matrimonial Causes Act 1973 (UK) s 27.

118. The Canada Pension Plan Act was extended to cover common law partners by Bill C-23. Common law partner is defined as “a person cohabiting with a contributor in a conjugal relationship at the relevant time having cohabited … for a continuous period of at least one year.”

119. Canada Pension Plan Act 1985 s 55(2)(a).

120. Canada Pension Plan Act 1985 s 55(3).

121. Canada Pension Plan Act 1985 s 55(4).

122. Law Commission of Canada, B Cossman and B Ryder, Legal Regulation of Adult Personal Relationships: Evaluating Policy Objectives and Legal Options in Federal Legislation (May 2000).

123. Canada Pension Plan Act 1985 s 55(1).

124. Property (Relationships) Act 1976 (NZ) s 8(f).

125. Commonwealth Attorney General’s Department, Superannuation and Family Law: A Position Paper (AGPS, Canberra, 1998) at 79. See also recommendations of Australia, Parliament, Senate Select Committee on Superannuation and Financial Services, Report on the Provisions of the Family Law Legislation Amendment (Superannuation) Bill 2000 (AGPS, Canberra, 2001).

126. See, for example, I Munro, “Gay couples left out of court shift”, The Age (8 March 2002).

127. Women’s Legal Service, Brisbane, Submission in Response to Superannuation and Family Law – A Position Paper of the Commonwealth Attorney’s General’s Department (August 1998) at 3.

128. The Position Paper proposed a system based on the premise that separating spouses are entitled to an equal share in each other’s superannuation to the extent that they have cohabited during the period of membership of the superannuation scheme. Commonwealth Attorney General’s Department, Superannuation and Family Law: A Position Paper (AGPS, Canberra, 1998) at para 3.1. See also the criticisms of this approach by K Dunn, “Splitting the Difference: Superannuation Equality and Family Law” (1998) 12(3) Australian Journal of Family Law at 233. The equal sharing proposal has since been abandoned; superannuation is now to be treated in the same way that other property is treated.

129. FLA s 90 MZB(5).

130. Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337. In the end, the Commonwealth claimed to draw its powers to bind superannuation trustees from its matrimonial causes power. Using the corporation’s power was not feasible because a large number of superannuation funds are not incorporated.

131. The Constitution s 51(xxxi). This issue arose particularly in relation to splitting funds held in defined benefit schemes because they are so difficult to value.