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Monday, 29 November 2004
Page: 93

Senator LUDWIG (7:30 PM) —I say at the outset that Labor supports the Family Law Amendment (Annuities) Bill 2004. The bill amends the Family Law Act 1975 to enable the Family Court of Australia to divide certain annuities as part of a property settlement between separating couples in the same way the court currently divides the parties' superannuation interests. Division of property following marriage breakdown is a matter governed by the Family Law Act. The Family Law Act and family law system need to be flexible enough to deal with the many varying types of assets held by the parties to a marriage.

The Family Law Legislation Amendment (Superannuation) Act 2001, supported by Labor, reformed the act so that assets held as superannuation could be fairly divided by parties following a marriage breakdown. This act remedied the uncertainty faced by parties to divorce proceedings, their legal representation and the courts where the right of a third party—for example, the trustees of a superannuation fund—would be affected by an attempt by the courts to divide a superannuation benefit. The passage of this bill follows logically from these changes made in respect of superannuation assets by the Family Law Legislation Amendment (Superannuation) Act 2001. We do note, however, that these problems should have been addressed at the time that the superannuation amendments were proposed and passed. There has been an unnecessary delay in bringing this legislation on, and we are concerned that a number of people have been left in limbo while this issue was being resolved.

This bill will bring the treatment of superannuation-like annuity products into line with the treatment of other superannuation products under the Family Law Legislation Amendment (Superannuation) Act 2001, which was supported by Labor. While the difference between superannuation and an annuity product is that superannuation is a legislative product while an annuity is a contractual one, the logic in maintaining a distinction between the two for the purposes of the Family Law Act can no longer be sustained. Both an annuity and superannuation are in essence assets preserved until retirement age and designed to provide a retirement income. So, although they are different products in terms of their legal basis, they are similar in their effect. Both are important assets created during the marriage and need to be equally subject to division upon a marriage dissolution.

It is therefore logical that they be subject to similar principles when dividing assets as part of a marriage separation. This bill will provide the courts with the certainty they need to make orders in respect of annuities. This bill may create an anomaly in that a spouse who was not originally a contractual party to the annuity—forgive me for the technical language, but it is called the non-member spouse—may become entitled to a share of the annuity upon a separation, even though the purchaser of the annuity product has not satisfied the contractual preservation requirement in this instance, such as retirement age. This may require an annuity provider in some cases to make a split payment to a non-member spouse who has not satisfied that preservation requirement.

The government has stated that it has consulted the financial services sector, the legal profession and the courts about the need for this bill. Labor considers minor the impact on life insurance companies and other providers of superannuation-like annuity products, and they have had an extended period of consultation in which to raise significant concerns or issues with the government. Labor believes that this bill will be beneficial for a number of people of retirement age who have superannuation-like annuity savings and who undergo marriage breakdown. Marriage breakdown is difficult for anyone in the marriage and for any children as a consequence. We have an obligation, though, to ensure that the Family Law Act is flexible enough to handle situations of this kind. The ability of the courts to make definitive orders and for the law to provide appropriate guidance to parties is important to avoid unnecessary and impractical trade-off of assets to cope with annuities tied up until retirement and beyond the reach of the family law. This is sensible amendment which Labor will support.