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Wednesday, 23 October 2002
Page: 5793


Senator MACKAY (7:23 PM) —On behalf of Senate Kirk, I seek leave to incorporate her speech on the second reading.

Leave granted.

The speech read as follows—

Family Law Legislation Amendment (Superannuation) (Consequential Provisions) Bill 2002 makes amendments to the Family Law Act 1975, the Judges' Pensions Act 1968, the Social Security Act 1991 and the Veterans' Entitlements Act 1986. The Bill's amendments are essentially a clarification of the 2001 Act. Labor supported the 2001 Act and will also support this Bill.

The Family Law Legislation Amendment (Superannuation) (Consequential Provisions) Act 2001 recognised the importance of superannuation funds as a source of family wealth in Australia. Compulsory membership of superannuation funds has meant that superannuation represents an increasingly significant proportion of the personal wealth of all Australians, and is now second in value only to the family home.

The Australian Bureau of Statistics released its report “Superannuation: Coverage and Financial Characteristics” last year, in which it identified that three quarters of the pre-retired population aged 15 to 69 years had some superannuation. Approximately 78% of males in this group had some superannuation, and 71% of females. Of these, however, the median total amount was $13,400 for men, more than double that of the median $6,400 for women.

These disparities reflect the substantially different employment experiences that face men and women. Men in work are far more likely to hold full-time positions, while almost half of all female jobholders are part-time workers.

Women are also much more likely to punctuate their working life with periods out of the workforce to care for children, the elderly and disabled. This not only tends to slow their career path, and progress toward better wages, it also means that little or no superannuation contributions are made during these periods.

In general, women have less superannuation than men, and those who do have superannuation have significantly smaller amounts than their male counterparts. These differences are evident in the statistics for retired Australians under 70 years of age who receive income from superannuation, with the relevant figure for men being 55% while the correlating percentage for women is only 28%.

Thus, the significance of the Family Law Legislation Amendment (Super) (consequential provisions) Act 2001 was to ensure that superannuation, as a substantial part of Australians' wealth, could be divided as part of a property settlement in the event of divorce. This was a step toward enabling more equitable and just settlements at the end of a marriage. The statistics I have given you above paint a picture of the superannuation situation for many Australians, and why it is so crucial that these benefits can be divided. The

Labor party also supports the Family Law Legislation Amendment (Superannuation) (Consequential Provisions) Bill 2002.

It is important that we have legislation in place that ensures that disadvantage does not become entrenched. Taking into account the vulnerable position of women from low asset marriages and allowing for superannuation payments to be divided is one way that we can do this.

However, it is also important that our legislation keeps pace with a rapidly changing Australian society. The Act does recognise the growing importance of superannuation as a family asset. It does not, however, recognise the need to rectify the current lack of legal provisions for same sex couples, who face the same difficulties, and should be afforded to same rights as, heterosexual couples.

The Senate Select Committee on Superannuation and Financial Services recommended that the Commonwealth discuss with the States how to achieve similar superannuation provisions for same sex couples that separate. The Government has refused to accept the States' referral of powers in this area.

The Opposition believes that the Government must act in this area. The law should not discriminate on the basis of gender, ethnicity or sexual preference. The Government's inaction on the issue of ensuring consistent superannuation and family law legislation for both heterosexual and homosexual Australians shows it to be unresponsive and unreasonable.

We should do all that we can to ensure that the Law itself does not discriminate. The Government, despite having been given the opportunity, has done nothing.

This Bill basically makes three minor amendments to the Family Law Act to clarify aspects of the 2001 Act.

Firstly, under the 2001 Act, a splittable superannuation interest included a payment to a reversionary beneficiary, but this term was not defined. This Bill defines a “reversionary beneficiary” as any person who becomes entitled to a benefit in respect of a superannuation interest of a spouse, after the death of that spouse. This is a broader definition than the one used in the superannuation industry but it reflects the intention of the original bill that most death benefits constitute splittable payments.

Secondly, this Bill rectifies an inconsistency that arose from the 2001 Act, in that successive splits could be made if a person divorces more than once, but this principle did not apply where the same couple divorces, remarries and divorces again.

Thirdly, under the 2001 Act, the entitlement of a spouse under a split was subject to preservation requirements if it was paid to a regulated superannuation fund of Retirement Savings Account. This Bill clarifies that the preservation requirements also apply to interests paid to an approved deposit fund or an exempt public sector superannuation scheme.

This Bill also make one amendment to the Judges' Pensions Act to authorise the making of regulations to set out factors for use in calculating the proportion of a judge's pension had “accrued” at the time of a judge's marriage breakdown. This amount can then be used to determine superannuation interest under the Family Law Act.

This Bill makes amendments to the Social Security Act and the Veterans' Entitlement Act, essentially to ensure that payments from a family law superannuation interest split can be consistently assessed with other income and assets under the social security and veterans' entitlement means tests. The bill authorises the Secretary of the Department of Family and Community Services, in the case of the Social Security Act, and the Repatriation Commission, in the case of the Veterans' Entitlements Act, to make guidelines for income testing of different kinds of income streams under the superannuation splitting regime. This is important as it provides consistency between the guidelines produced by the Department of Family and Community Services and those produced by the Repatriation Commission.

My South Australian colleague in the House of Representatives, the Member for Kingston and Assistant Shadow Treasurer, the Hon. David Cox MP, has outlined some technical concerns relating to the implementation of this Bill, which I will briefly relate to you.

In general, the Government has handled the implementation of this Bill very poorly. The complexities of family law and superannuation mean that together this new legislation is very complicated. Government bungling has made this even more difficult for those who must operate under the altered legislation.

A particular issue is the commencement provision in the original Bill allowed for an earlier commencement date by proclamation. It now seems certain that no such proclamation will be made and the legislation will commence the full 18 months after receiving royal assent. If this was always the government's intention, they should have made this clear from the beginning.

The inadequacies of the initial legislation have made the implementation of the Act particularly difficult for the superannuation industry, who had initially been promised a transition period of at least twelve months from the tabling of the new regulations. However, the government made an additional 102 pages of regulations on 25 July this year, largely to make up for drafting deficiencies in the Act. This is in addition to the amendments made by this bill. Most of the announced amendments to the regulations, made on 25 July, were of a minor and technical nature. However, the treatment of allocated pensions for the purposes of payment splits was substantially revised. Altering rules applying to an entire class of superannuation benefits so tardily points to a government that is inefficient, and out of touch with the real work that needs to be done in implementation.

It is crucial that both industry and the general public are informed of these changes, so that advisers and super funds are able to best inform their clients. It is also crucial that the public are aware of these changes and their intricacies so they are able to make informed and wise decisions.

Despite the importance of clarity in fostering an understanding of legislation, confusion reigns in the interpretation of some areas of this Act. One is the extent to which superannuation benefits transferred from one partner to another are subject to preservation. Apparently, it is the government's intention that preserved and non-preserved components of an interest be transferred on a pro rata basis. Despite the fact that Peter Costello has prematurely foreshadowed plans to increase the preservation age the Government needs to act now to clarify this aspect of the new law.

Another area of uncertainty is what is commonly called the `clean break' principle. This refers to whether members of defined benefit schemes will be able to transfer a proportion of their benefit, as required by a court order or financial agreement, to their former partner straightaway or whether they will need to wait until their benefits become payable. Amendments to the Superannuation Industry Supervision Regulations provide for the immediate transfer of accumulation interests to another account in the same fund or a different fund, depending on the rules of the fund or the receiving partner's preference.

The Attorney-General's Department has indicated that there are constitutional difficulties in applying this `clean break' principle to certain funds, and in particular, state public sector funds. This needs clarification. I believe the government must ensure that we have a national approach to superannuation regulation, and they should act expediently in this area for consistency and conformity.

The continuing uncertainty surrounding these regulations has only contributed to the low levels of awareness in the community and, indeed, the superannuation industry and family law practitioners.

The government's lack of attention to detail in ensuring that the general public is able to understand and operate within the new legislation shows a government out of touch with the people. Everyday Australians should be uppermost in the mind of the government when drafting and implementing any new legislation regime. Unfortunately, this government seems to have forgotten the very people who elected them.

An area of ongoing concern to the Opposition is the resources provided to the Superannuation Complaints Tribunal. The original bill conferred new powers on the tribunal to deal with complaints against superannuation providers from prospective members of superannuation funds-that is, spouses or former spouses who are party to, engaged in or considering a property settlement involving superannuation. It seems likely that a number of disputes will arise in relation to the splitting of superannuation interests and payments and the Superannuation Complaints Tribunal will need more funding to cope with these.

The exceptionally complex provisions and the government's lack of action to clarify them means that the number of disputes is also likely to be higher than expected. The tribunal's workload will most certainly increase after December 28th. Labor's concerns have been noted by the Senate inquiry, but as yet we have seen no indication from the government that it intends to act on this matter.

Senator Coonan should commit to providing more resources to the tribunal and begin to take appointments more seriously than her predecessor Mr Hockey, former Minister for Financial Services and Regulation, did when he appointed former Liberal Senator Michael Baume to this supposedly independent tribunal.

Labor supports this bill as part of the necessary reforms to superannuation and family law. The number of outstanding issues that remain unaddressed by the government is testament to their lack of regard for all Australians who must contend with this new legislative regime. The government has an obligation to clarify the remaining ambiguities and attend to the task of creating consistent superannuation legislation that does not discriminate. I commend this Bill to you as a small step in this direction.