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Family Law Amendment (Annuities) Bill 2004
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Family Law Amendment (Annuities) Bill 2004
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THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FAMILY LAW AMENDMENT (ANNUITIES) BILL 2004
(Circulated by authority of the Attorney-General,
the Honourable Philip Ruddock MP)
TABLE OF CONTENTS
General Outline 1
Financial Impact Statement 1
Consultation Statement 1
Notes on Items 3
Schedule 1 4
Schedule 2 4
This Bill will:
· amend the definition of “eligible superannuation plan” in section 90MD of the Family Law Act 1975 ; and
· insert a provision in Part VIIIAA of the Family Law Act;
to move the power to make orders binding providers of superannuation-like annuity products from Part VIIIAA to Part VIIIB of the Family Law Act.
The effect will be bring the power to make such orders within the family law superannuation regime under which future superannuation payments to a party to a marriage have, since 2002, been able to be split on marriage breakdown or divorce.
Part VIIIAA was inserted by Schedule 6 of the Family Law Amendment Act 2003 to enable orders to be made in property settlement proceedings that bind a party other than a party to a marriage.
Concern about the treatment of superannuation-like annuity products was raised by the financial services sector during Parliamentary consideration of proposed Part VIIIAA in 2003.
The commencement of that Part was delayed for 12 months from Royal Assent to allow time to further consider concerns that had been raised by the sector.
Following consultation, the Bill will bring the power to make orders binding providers of these products within Part VIIIB of the Family Law Act, so that they are treated consistently with other superannuation held by parties to a marriage on marriage breakdown or divorce.
FINANCIAL IMPACT STATEMENT
The Bill will have an impact on life insurance companies and other providers of superannuation-like annuity products, largely limited to the bringing forward of changes to information technology systems that would have been necessary once orders commenced to be made under Part VIIIAA of the Family Law Act. Given that the orders that may be made under Part VIIIB of the Family Law Act are limited, the impact is considered minor. The Office of Regulation Review has advised that a Regulation Impact Statement is not required.
The Bill follows on:
· a suggestion made towards the end of consideration of the Family Law Legislation (Superannuation) Amendment Act 2001 in 2001 that annuity products might be brought into the coverage of Part VIIIB of the Family Law Act; and
· consultations held with the finance industry on Part VIIIAA of the Family Law Act when its insertion was proposed, by Schedule 6 of the Family Law Amendment Act 2003 , in 2003.
The extension of Part VIIIB to superannuation-like annuity products has been subject to consultation with the finance services sector, the legal profession, the Family Court of Australia and the Federal Magistrates Court.
NOTES ON ITEMS
Clause 1 - Short title
Clause 1 provides for the Act to be cited as the Family Law Amendment (Annuities) Act 2004 .
Clause 2 - Commencement
Clause 2 provides for the commencement of the Act.
Subclause 2(1) provides that each provision specified in column 1 of the table in clause 2 will commence in accordance with column 2 of the table.
Sections 1 to 4 and anything in the Act not covered elsewhere in the table in clause 2 will commence when the Act receives Royal Assent.
Schedule 1 will commence immediately after the commencement of Schedule 6 of the F amily Law Amendment Act 2003 . Schedule 6 of that Act commences on 17 December 2004.
Schedule 2 will commence on a single day to be fixed by Proclamation. If any of the provisions in Schedule 2 do not commence within 6 months beginning on the day on which the Act receives Royal Assent, they will commence on the first day after the end of that period. This period will allow time for amendments that need to be made to the Family Law (Superannuation) Regulations 2001 , to support the amendments in Schedule 2 of the Bill, to be developed in consultation with the financial services sector and made.
Clause 3 - Schedules
Clause 3 provides that each Act specified in a Schedule will be amended or repealed as set out in the applicable item of the Schedule and that any other item in a Schedule will have effect according to its terms.
Clause 4 - Application of annuity amendments
Clause 4 provides for the application of the annuity amendments set out in Schedule 2. The annuity amendments in Schedule 2 will extend the operation of Part VIIIB of the Family Law Act 1975 to annuities purchased by money which has been in the superannuation system.
The annuity amendments will apply to all marriages, including to marriages that were dissolved before their commencement, except where a property settlement in respect of the marriage has been finally concluded, by an order made section 79 of the Family Law Act or an agreement approved by a court under section 87 of that Act, prior to that time.
The annuity amendments will, however, apply if the order made under section 79 of the Family Law Act is set aside other than where it is set aside, pursuant to subsection 79A(1A), with the consent of the parties. The annuity amendments will also apply if the court approval of any agreement under section 87 of that Act is revoked, other than where it is revoked on the ground in paragraph 87(8)(b) that the court is satisfied that the parties desire the revocation.
The annuity amendments will also not apply in relation to a financial agreement, that deals with annuities, made prior to the commencement of the annuity amendments and which has not been set aside or terminated. Such an agreement will not be one to which the annuity amendments will apply.
The application provisions for Schedule 2 reflect those for other superannuation products contained in the Family Law Legislation Amendment (Superannuation) Act 2001 when Part VIIIB of the Family Law Act commenced.
SCHEDULE 1 - AMENDMENTS COMMENCING ON 17 DECEMBER 2004
Item 1 - After section 90AC
Item 1 of Schedule 1 will insert a new section 90ACA in the Family Law Act to provide that the power of a court to make an order under Part VIIIAA of that Act binding a party other than a party to a marriage does not apply to eligible annuities.
As mentioned in the notes on clause 2:
· Schedule 1 will commence immediately after the commencement of Schedule 6 of the Family Law Amendment Act 2003 , which inserted Part VIIIAA in the Family Law Act in 2003, on 17 December 2004; and
· Schedule 2 will commence on Proclamation.
Before Schedule 2 is proclaimed, some amendments will need to be made to the Family Law (Superannuation) Regulations 2001 , which set out requirements (mainly relating to valuation and information matters) in relation to superannuation interests held by parties to a marriage on marriage breakdown. These amendments can be made from the time of Royal Assent to this Bill.
It is likely that there will be some time between the commencement of Part VIIIAA and the Royal Assent to the Bill or, if Royal Assent precedes that commencement, between the commencement of Part VIIIAA and the making of the amendments to the Family Law (Superannuation) Regulations. New section 90ACA will ensure that the providers of eligible annuities will not be subject to orders under Part VIIIAA of the Act during that period.
SCHEDULE 2 - AMENDMENTS COMMENCING ON PROCLAIMED DATE
Item 1 - Section 90MD
Item 1 will insert a definition of “eligible annuity” in section 90MD of the Family Law Act.
The definition draws on the definition of an “annuity” in section 10 of the Superannuation Industry (Supervision) Act 1993 and requires that the annuity is treated, for the purpose of the provisions in the Income Tax Assessment Act 1936 relating to reasonable benefit limits, as being purchased out of rolled-over amounts.
A rolled-over amount can include a payment made in respect of a person in consequence of the termination of his or her employment, or from one entity to another entity within the superannuation system (for example, a payment from a superannuation fund to a life insurance company for the purchase of an annuity for a member of the fund), where there is a requirement to retain the amount paid as retirement income.
Item 2 - Section 90MD (at the end of the definition of eligible superannuation plan )
Item 2 will insert a further category in the definition of an “eligible superannuation plan” in section 90MD of the Family Law Act, to extend the definition of that term to include an eligible annuity.
Under Part VIIIB of the Family Law Act, courts may make orders (or parties may agree) to:
· split future payments that become payable in respect of an interest that a party to a marriage has as a member of an eligible superannuation plan; or
· prevent, through a payment flag, future payments being made in respect of such an interest.
Under the definition of that term in section 90MD of the Act, a “member” in relation to such a plan, includes a prospective beneficiary.