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Judges and Governors-General Legislation Amendment (Family Law) Bill 2012

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2010-2011-2012

 

 

the parliament of the commonwealth of australia

 

 

house of representatives

 

 

 

JUDGES and Governors-General Legislation Amendment (Family Law) Bill 2012

 

 

explanatory memorandum

 

 

 

 

(Circulated by the authority of the Minister for Finance and Deregulation, Senator the Hon Penny Wong)

 



 

general outline

judges and Governors-General Legislation Amendment (Family Law) Bill 2012

Outline

 

The Bill amends the Judges’ Pensions Act 1968 (Judges’ Act) and the Governor-General Act 1974 (GG Act) to implement new family law splitting arrangements in relation to Federal Judges and Governors-General.

 

The proposed amendments will allow a former spouse of a Judge or of a Governor-General to receive his or her share of the superannuation benefit as a separate benefit at the time of a family law split. This is consistent with family law, which aims to provide separating parties with a clean break.

 

The proposed amendments are consistent with the family law splitting arrangements in the other Commonwealth defined benefit schemes.

 

Background

 

Under the Family Law Act 1975 , superannuation interests form part of the property of married and de facto relationship couples and are able to be split between separating parties at the time of a property settlement.

 

However, the current family law arrangements for Judges and Governors-General are inconsistent with family law policy of a clean break and are also out of step with the other Commonwealth superannuation schemes. 

 

For Judges, the current ‘percentage-only’ splitting arrangements mean that any split in a family law settlement of the pension of a Judge occurs only when payments are made to a retired Judge.  Payments to a former spouse do not commence until the Judge retires and cease upon the death of the Judge.  There is no certainty as to the overall quantum of benefit that the former spouse is entitled to receive.

 

For Governors-General, there are currently no scheme specific family law arrangements in place to cover the splitting of superannuation pensions.

 

The proposed amendments will address these issues by putting in place scheme specific, separate interest family law arrangements for Judges and Governors-General. 

 

Key elements of the proposed new arrangements

 

The separate interest approach provides a clean break of superannuation entitlements between the parties at the time of a family law split and also provides both parties with control over their respective individual benefits.

 

The amendments proposed in this Bill do not mean that the Commonwealth will be determining property settlements. The relevant court or the separating parties will determine whether the superannuation benefit is to be split and, if so, the amount or percentage of the split between the parties.

 

The splitting arrangements in the Bill operate when the Secretary of the Department of Finance and Deregulation (Finance Secretary), on behalf of the superannuation scheme, is served with a court order, or a splitting agreement between separating parties, in relation to the split of an interest in the superannuation scheme.

 

Payment rules for the former spouse’s separate interest benefit

A separate interest benefit for the former spouse is created at the time of the family law split.

 

Where this occurs before the Judge or Governor-General has retired - that is, before the Judge or Governor-General has commenced a pension - the pension benefit for the former spouse will be deferred until the former spouse reaches at least age 60 or becomes permanently incapacitated.

 

Where the split occurs after the Judge or Governor-General has retired and has commenced receipt of his or her pension, the pension benefit for the former spouse will become payable immediately.

 

Where the former spouse dies before a deferred pension becomes payable, a lump sum amount will become payable to his or her legal personal representative.

 

There is no further benefit payable on the death of the former spouse in receipt of a pension.

 

Consequential reduction of the Judge’s or Governor-General’s benefit

If a Judge or Governor-General is serving at the time of a family law split, his or her benefit will be reduced from the time it becomes payable, to reflect the amount transferred to the former spouse.

 

If the Judge is serving and has not yet qualified for a pension at the time of the split, the adjustment of that benefit will be based on the portion that has accrued at the time of the split.  This is measured by the number of days the Judge has served at the time of the split as a proportion of the number of days needed for the Judge to qualify for a pension. The proportion of the Judge’s benefit that accrues after the split will not be counted in working out the family law reduction to the Judge’s pension.

 

Where the Judge or Governor-General has retired and is in receipt of a pension benefit at the time of the split, the reduction to that pension will commence immediately from the time the benefit is split.



 

Calculation of benefits under a split

The methodology and supporting actuarial factors for calculating benefits under a family law split (except in the case of a Judge who has not yet retired) will be set out in delegated legislation (Pension/Allowance Orders) to be made under the amended Judges’ Act and the GG Act.  The Bill includes the necessary power for the Minister for Finance and Deregulation to make these Orders.  

 

Financial Impact

The Bill is not expected to have an impact on the Budget. The transitional provisions could potentially result in a marginal increase in the longer term cost of the Judges’ Pensions Scheme, depending upon the lifetime of the respective parties.  Any actual impact is unquantifiable.

 

Regulatory Impact Statement

The Office of Best Practice Regulation has advised that a Regulatory Impact Statement is not required.  This is because the proposal does not have a regulatory impact on business or the non-profit sector.

 

Statement of Compatibility with Human Rights

The Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 as it advances the protection of human rights.

 

The Bill engages human rights recognised in the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW).

 

In 2008, Sex Discrimination Commissioner Elizabeth Broderick advised the then Attorney-General that, in her view, the Judges Pension Act 1968 may be inconsistent with the objects of the Sex Discrimination Act 1984 and may also violate Article 16 of CEDAW. She explained that, as a consequence of the current family law splitting arrangements for Federal Judges, three major disadvantages for divorcing spouses of Federal Judges are likely.

·                 Commencement of pension payments is timed with the Judge's retirement and is therefore uncertain.

·                 For women non-members there may be a gap between their retirement and their entitlement to pension payments, given that men tend to work longer than women before retiring.

·                 There is no entitlement to pension payments after the Judge dies. Given the differential life expectancies of women and men, this means that women affected are unlikely to receive pension payments for the duration of their retirement.

The above issues also apply in relation to spouses of Governors-General.

 

The Bill promotes the human rights of women by allowing former spouses of Judges and Governors-General to receive a separate interest benefit in the event of a family law split.  This approach resolves the issues identified by the Sex Discrimination Commissioner.

NOTES ON CLAUSES

Clause 1: Short title

1.         Clause 1 provides for the short title of the Act to be the Judges and Governors-General Legislation Amendment (Family Law) Act 2012 (the Act).

 

Clause 2: Commencement

2.         Clause 2 is the commencement provision for the Bill.  It provides that sections 1 to 3 will commence on the day the Act receives the Royal Assent.

 

Schedules 1 and 2 will commence on a day or days to be fixed by Proclamation. However, if any of the provision(s) do not commence within 6 months of the Act receiving Royal Assent, the schedules will commence on the day after.

The commencement arrangements for Schedules 1 and 2 will allow time for the necessary delegated legislation to be made.

 

Clause 3: Schedules

3.         Clause 3 provides that each Act that is specified in a Schedule is amended or repealed as set out in the Schedule concerned and any other item in a Schedule to this Act has effect according to its terms.

 

Schedule 1 - Amendment OF the

judges’ Pensions Act 1968

Part 1 - AMENDMENTS

4.         The Judges’ Pensions Act 1968 (Judges’ Act) provides for superannuation pension benefits (and lump sum benefits in certain circumstances) to Judges and their eligible beneficiaries. Proposed new sections 17AA to 17AJ will allow a former spouse of a Judge to receive his or her share of the Judge’s superannuation pension as a separate benefit at the time of a family law split.

 

5.         The Schedule introduces a number of new definitions into the Judges’ Act.  These include:

 

accrued pension factor ” or “ APF ” means the amount of pension benefit that has accrued to the Judge at the time of the family law split.

 

APF ” has the same meaning as “ accrued pension factor ”.



 

“associate deferred pension ” means the pension payable to the former spouse under subsection 17AA(3).  The pension is deferred if the split occurs while the Judge is serving and the former spouse has not met a condition for payment of the pension, such as reaching retirement age or being certified as incapacitated.

 

associate immediate pension ” means the pension that is payable to the former spouse under subsection 17AA(2).  The pension commences immediately if the Judge has retired at the time of the split .

 

associate pension ” means an “ associate deferred pension ” or “ associate immediate pension ”. An associate pension is a pension paid to a former spouse.

 

base amount ” means the amount specified in, or calculated under a splitting agreement or the amount allocated under subsection 90MT(4) of the Family Law Act 1975 .

 

family law value ” is the amount the court has determined in accordance with regulations under the Family Law Act 1975 for the purpose of paragraph 90MT(2)(a) of that Act.

 

mandatory retirement day ” means the day on which the Judge is required to retire.

 

medical practitioner ” means a person registered or licensed as a medical practitioner under a law of a State or Territory.

 

member spouse ” means the spouse who has the superannuation interest in accordance with Part VIIIB of the Family Law Act 1975 , in this case a Judge or retired Judge (or spouse of a Judge or retired Judge).  It can also include a former spouse who is entitled to an associate deferred pension or associate immediate pension where that spouse is involved in a further family law split.

 

non-member spouse ” means the spouse who is not the member spouse in relation to a superannuation interest in accordance with Part VIIIB of the Family Law Act 1975 , in this case the former spouse of a Judge, retired Judge, spouse of a Judge or retired Judge or of a person in receipt of an associate deferred pension or associate immediate pension .

 

non-standard pension ” means a pension that is paid in respect of children.

 

operative time ” in relation to a payment split under a splitting agreement or splitting orders means the operative time for the purposes of Part VIIIB of the Family Law Act 1975 .

 

original interest ” means a superannuation interest in the Judges’ Act in relation to which section 17AA applies.

payment split ” has the same meaning as in Part VIIB of the Family Law Act 1975 .

 

Pension Orders ” means the Pension Orders made under subsection 17AI(1).

 

permanently incapacitated ” has the meaning given by subsection 17AB(4).

 

qualified for a pension ” means a Judge’s entitlement to a pension if he or she satisfies subsection 6(1) or 6(2D).

 

qualifying service days ” has the meaning given by section 4AD.

 

retirement pension ” means a pension under section 6.

 

scheme value ” means the amount determined under the Pension Orders.

 

splitting agreement ” means a superannuation agreement or a flag lifting agreement within the meaning of Part VIIIB of the Family Law Act 1975 .

 

splitting order ” has the same meaning as in Part VIIIB of the Family Law Act 1975.

 

splitting percentage ” means the percentage specified in the splitting agreement under subparagraph 90MJ(1)(c)(iii) of the Family Law Act 1975; or the percentage specified in the splitting order under subparagraph 90MT(1)(b)(i) of that Act.

 

spouse pension ” means the pension a spouse is entitled to under section 7.

 

standard pension ” means either a retirement pension , spouse pension , a pension under section 8 or an associate pension .

 

superannuation interest ” has the same meaning as in Part VIIIB of the Family Law Act 1975.

 

transfer amount ” forms the basis of an associate deferred pension or associate immediate pension and represents the separate interest created for the former spouse.

 

Where a splitting percentage applies, the transfer amount is worked out by multiplying the splitting percentage by the greater of the family law value or the scheme value .  Calculation of the former spouse’s benefit is based on the higher of these values.

 

Where a base amount is specified, the family law value and the scheme value are also calculated. If the family law value is equal to or more than the scheme value , the base amount will apply.

 

Where the scheme value is higher than the family law value , the transfer amount will be calculated by applying a formula. The formula applies the whole dollars in the base amount as a proportion of the whole dollars in the family law value and multiplies this by the scheme value .  As for the splitting percentage, calculation of the former spouse’s benefit will be calculated on the higher of the two valuation methods.

 

transfer factor ” is the amount worked out by diving the number of whole dollars in the transfer amount by the number of whole dollars in the scheme value .  The transfer factor is rounded to 6 decimal places.

 

6.         New section 4AD provides the basis for working out the qualifying service days of a person who has served a Judge. The qualifying service days is used in calculating the accrued pension factor where at the time of the family law split the Judge is serving. 

 

7.         The qualifying service days takes into account the qualification age of the individual Judge and his or her appointment age as well as any non-service days .  The qualification age is based on how many days it takes the Judge to qualify for a pension under subsection 6(1) or (2D) of the Judges’ Act.

 

8.         If an invalidity pension becomes payable before the Judge has qualified for a pension under subsection 6(1) or (2D), the qualifying service days will be calculated based on the number of days it would have taken the Judge to so qualify if he or she had continued to serve until his or her mandatory retirement day .

 

9.         If the Judge dies before a pension becomes payable and the Judge has already qualified for a pension under subsection 6(1), the qualification age will be the Judge’s age in days on the first day he or she so qualified.  If, however, the Judge dies before a pension becomes payable and has not qualified for a pension as at the date of his or her death, the qualification age will be based on the number of days it would have taken the Judge to so qualify if he or she had continued to serve until his or her mandatory retirement day .

 

10.     Non-service days - that is, the number of days a person did not serve as a Judge - are not counted in a Judge’s qualifying service days .

 

11.     To calculate the qualifying service days the Judge’s qualification age is subtracted from his or her appointment age and any non-service days .  Accordingly, the qualifying service days for each individual Judge will be different depending upon their age at appointment, and thus how many days it would take to qualify for a pension under subsections 6(1) or (2D) of the Judges’ Act. 

 

 

 

For example, not taking into account leap years and assuming no non-service days , a Judge who is appointed at exactly age 50 will have 3,650 qualifying service days .  A Judge who is appointed at exactly age 40 will have 7,300 qualifying service days - this is because the Judge will not qualify for a pension under section 6(1) of the Judges’ Act until he or she has reached age 60 - that is, the Judge would have served 20 years before qualifying.  A Judge who is appointed at exactly age 62 and retires on his or her mandatory retirement day (at age 70 for example) thus qualifying for a pension under subsection 6(2D), will have 2,920 qualifying service days .

 

12.     Clauses 31 to 38 insert minor technical changes to the Judges’ Act as a result of the proposed amendments.

 

13.     Clause 39 inserts new sections 17AA to 17AJ into the Judges’ Act.

 

Associate pension for non-member spouse

 

14.     When the Secretary of the Department (Finance Secretary) receives a splitting agreement or splitting order in relation to a superannuation interest under the Judges’ Act, new section 17AA provides for the former spouse to be entitled to an associate immediate pension or an associate deferred pension .

 

Note: For ease of understanding, a “ member spouse ” is referred to as a Judge, retired Judge, spouse of a Judge or retired Judge or a former spouse who is entitled to an associate deferred pension or an associate immediate pension .  A “ non-member spouse ” is referred to as a former spouse of one of these persons.

 

15.     This provision is subject to certain conditions. The conditions are that:

•          the interest under the Judges’ Act is not an entitlement to a non-standard pension , that is, a pension payable in respect of a child;

•          both the member spouse and the former spouse are alive at the operative time ; and

•          the base amount must not be more than the family law value or scheme value of the interest.

 

Associate immediate pension

 

16.     New subsection 17AA(2) provides that if at the operative time the member spouse is in receipt of a pension (that is, because he or she has retired), the former spouse is entitled to an associate immediate pension - that is, a pension that commences from the time of the family law split.  The rate of the pension is to be calculated under the Pension Orders by reference to the transfer amount .

 

Note:  the “ operative time ” is the date of effect of the splitting agreement or splitting order - for ease understanding this is referred to as the time of the family law split or time of the split.

 

17.     New subsection 17AA(3) provides that if at the time of the split, the Judge is not in receipt of a pension (that is, because he or she has not yet retired), the former spouse is entitled to an associate deferred pension - that is, a pension that is not payable until the spouse satisfies a condition for payment of the pension under section 17AB.

 

18.     New subsection 17AA(4) provides for appropriate rounding of the transfer amount .

Associate deferred pension

19.     New subsections 17AB(1) to 17AB(5) provides for the calculation of, and payment rules for, an associate deferred pension .

 

20.     The Pension Orders provide for the calculation of the annual rate of the associate deferred pension .  The associate deferred pension is calculated by reference to the transfer amount .

 

21.     New subsection 17AB(2) provides for appropriate rounding of the transfer amount .

 

22.     New subsection 17AB(3) sets out when the pension is payable.  This is from the time of the split and the earliest of one of the following dates:

•          when the Finance Secretary is satisfied that the former spouse has become permanently incapacitated ;

•          on request to the Finance Secretary when the former spouse is aged 60 or over;

•          when the former spouse reaches age 65.

These payment rules allow a former spouse to access his or her benefit based on conditions that are broadly consistent with the payment rules applying to most other superannuation benefits.

 

23.     New subsection 17AB(4) sets out the circumstances in which the former spouse is permanently incapacitated .

 

24.     New subsection 17AB(5) provides that the former spouse may give written notice to the Finance Secretary specifying a day that is not before his or her 60 th birthday.

 

25.     New subsection 17AB(6) provides that if the former spouse dies before the deferred pension has become payable, a lump sum benefit will become payable to the legal personal representative or, if none can be found, such other person as determined by the Finance Secretary. The Pension Orders will provide a method of calculating the lump sum.

 

26.     New subsection 17AB(7) provides that the lump sum benefit is payable out of the Consolidated Revenue Fund, which is appropriated accordingly.  This is similar to the arrangements in the Judges’ Act for payment of other lump sum benefits, such as those under section 12A.

Application for payment of associate deferred pension

27.     New section 17AC provides the conditions that must be met before an associate deferred pension is payable. The former spouse must request that the benefit be paid by written application to the Finance Secretary and provide any necessary information to determine whether the benefit is payable. For example, an application for payment on the grounds of incapacity must be accompanied by relevant medical certificates or other information that the Secretary requires.

Operative time during growth phase - reduction of retirement pension

28.     New subsection 17AD(1) provides for the reduction of the Judge’s pension where the Judge is not in receipt of a pension at the time of the family law split, but where a pension later becomes payable.  That is, this section applies where the split occurs when the Judge is serving and the Judge later retires and a pension becomes payable.

 

29.     The subsection also applies in the case of a Judge who becomes entitled to an invalidity pension under subsection 6(2) of the Judges’ Act, or who dies before qualifying for a pension, where the Judge would have qualified for a pension if he or she had continued to serve until his or her mandatory retirement day .

 

30.     Under this subsection, the reduction also applies to the calculation of a reversionary pension for an eligible spouse where the Judge dies in service before retiring and becoming entitled to a pension.

 

31.     New subsection 17AD(2) provides the method for the reduction of the pension. The reduced pension is calculated by firstly working out the annual rate of the pension that is payable under section 6A, 6B or 6C of the Judges’ Act and then reducing that rate by the amount worked out using the formula set out in subsection (5).  The formula relies on the accrued pension factor and transfer factor , together with the rate of pension worked out under section 6A, 6B or 6C, as applicable.

 

32.     New subsection 17AD(3) requires that any reduction to the Judge’s pension under section 16 of the Judges’ Act must be taken into account under paragraph 17AD(2)(a).  This will make sure the Judge’s pension is reduced based on the amount of pension the Judge is actually receiving.

 

33.     New subsection 17AD(4) applies to a reversionary pension for an eligible spouse where the Judge dies before becoming entitled to a pension.  This subsection sets out steps for determining pension that is payable under section 7 of the Judges’ Act, which provides that a pension payable to an eligible spouse is 62.5% of the relevant pension in relation to the Judge.



 

The relevant pension in relation to the Judge is calculated by firstly working out the annual rate of pension under section 6A, 6B, or 6C of the Judges’ Act, as applicable, and then reducing that rate by the amount worked out using the formula in subsection (5).  That is the calculation of the spouse pension is based on the reduced pension and is 62.5% of that amount.

 

Note that the definition of relevant pension is based on the pension that would have been payable to the Judge had he or she retired on the date of his or her death, and if the Judge had not qualified for a pension under subsection 6(1), is based on the invalidity pension that would have been payable to the Judge as if the Minister had certified that the retirement was due to invalidity.

 

34.     New subsection 17AD(5) sets out the formula for calculating the family law reduction amount.  The formula provides for the accrued pension factor to be multiplied by the transfer factor .  The result is multiplied by the pension rate , which is defined to mean the annual rate of the retirement pension disregarding any surcharge debt, to give the family law reduction amount. An example of this calculation is set out below.

 

35.     New subsection 17AD(6) sets out the accrued pension factor ( APF ).  If at the time of the family law split, the Judge has reached age 60 and has served 10 years, the accrued pension factor ( APF ) is 1.  This is because the Judge has met the eligibility criteria and the pension benefit under the Judges’ Act has been fully accrued.  If the Judge has not qualified for a pension, the accrued pension factor is worked out by dividing the number of days the Judge has served at the time of the split by the number of qualifying service days of the Judge.

 

For example, a Judge appointed at exactly age 50 has a family law split at exactly age 55.  The transfer factor is 0.4, based on a splitting percentage of 40% in favour of the former spouse as set out in the splitting order or agreement.

The pension rate is assumed to be $304,800 (60% x salary of $508,000). Note that the qualifying service days are approximate as no leap years have been taken into account.

The accrued pension factor is:

1,825 / 3,650 = 0.5

This reflects that the Judge has accrued 50% of the pension benefit at the time of the family law split.

 

In the above example, the amount worked out in subsection (5) is:

(0.5 x 0.4) x $304,800

= $60,960



 

This reflects the reduction amount based on 40% of the Judge’s benefit being transferred to the former spouse, where only half the benefit had accrued at the time of the split.  Accordingly, the family law reduction is 20% of the Judge’s benefit overall.

 

36.     New subsection 17AD(7) allows for rounding of the accrued pension factor .

 

37.     New subsection 17AD (8) provides that the family law reduction amount is to be taken into account when working out the reversionary pension payable to the (subsequent) spouse of a Judge under section 8, when it later becomes payable.

 

38.     New subsection 17AD(9) provides that a family law reduction should be disregarded for the purposes of calculating any non-standard pension that may become payable at a later date. This will make sure that, if the Judge dies and a pension becomes payable in respect of an eligible child, the rate of that pension will be calculated as if no family law reduction of the Judge’s pension had occurred.

Reduction of retirement pension if original interest has been split more than once

39.     New subsection 17AE(1) provides for circumstances where the interest has been split more than once before it becomes payable.  This would occur where the Finance Secretary receives another splitting agreement or splitting order arising from a later family law split in respect of the Judge, or if the Judge has died, the spouse in receipt of a reversionary pension.

 

40.     New subsection 17AE(2) allows the formula used in subsection 17AD(5) to be used on more than one occasion by replacing the reduction factor with an interim factor, or a series of interim factors, which represent the reductions applied in relation to reductions before the most recent family law split.

 

An example of this is set out in the Bill under the Method Statement.

Operative time during growth phase - reduction of a benefit under section 12A

41.     New section 17AF provides for the reduction of the lump sum benefit that applies under section 12A of the Judges’ Act.  This section applies where at the time of the split the Judge has not retired and a benefit later becomes payable to the Judge under section 12A of the Judges’ Act.  This could occur, for example, if the Judge does not serve for the minimum period to qualify for a pension under the Judges’ Act.

 

42.     The lump sum benefit is reduced, with effect from the time of the family law split, by the benefit amount calculated at that time multiplied by the transfer factor .

Operative time during the growth phase - reduction of associate deferred pension

43.     New section 17AG provides for the family law reduction of an associate deferred pension, where the former spouse of a Judge, who is entitled to an associate deferred pension , has a family law split with another subsequent spouse.  That associate deferred pension , when it becomes payable, will be reduced in accordance with the Pension Orders .

Operative time during payment phase - reduction of standard pension

44.     New subsection 17AH(1) provides for the reduction of a standard pension where a family law split occurs when the pension is being paid.  This includes a pension being paid to a retired Judge, the (subsequent) spouse of a deceased retired Judge who has another family law split involving a subsequent spouse, or to the former spouse of a Judge who has another family law split involving a subsequent spouse.

 

45.     New subsection 17AH(2) provides that if the standard pension is not a retirement pension - that is, it is a pension being paid to a spouse as an associate immediate pension or it is a reversionary pension under section 7 of the Judges’ Act that is being paid to a spouse of a deceased Judge - the rate of the pension is reduced to the amount calculated under the Pension Orders .

 

46.     Under new subsection 17AH(3), if the standard pension is a retirement pension , the annual rate of the pension is calculated by firstly working out the annual rate of the pension under section 6A, 6B or 6C of the Judges’ Act, as applicable, and then reducing that rate to the amount calculated under the Pension Orders .

 

47.     New subsection 17AH(4) provides for a reduction under section 16 of the Judges’ Act to be taken into account in working out the annual rate of pension under sections 6A, 6B or 6C of the Judges’ Act.

 

48.     The reduction is to be taken into account when working out the reversionary pension to a (subsequent) spouse of a deceased Judge under section 8, when it later becomes payable.  However, any reduction under section 16, as provided for by subsection (4), will be disregarded.

 

49.     The reduction is to be disregarded for the purposes of calculating any non-standard pension that may become payable at a later date.  This will make sure that, if a child pension becomes payable, the rate of that pension will be calculated as if no reduction of the Judge’s pension or reversionary spouse pension had occurred.

Pension Orders

50.     New section 17AI provides that the Minister may make Pension Orders for the purposes of the proposed new arrangements and that those Pension Orders will be disallowable instruments.

 

Compensation for acquisition of property

 

51.     New section 17AJ provides for a person to claim compensation from the Commonwealth if the operation of new sections 17AA to 17AH or the Pension Orders results in an acquisition of property from that person otherwise than on just terms.  The compensation amount may be settled in the court if the Commonwealth and the person cannot agree on the amount of compensation.

 

52.     Clauses 40 to 43 insert minor technical changes to the Judges’ Act as a result of the proposed amendments, including providing a mechanism, consistent with that in the Judges’ Act, for the review of decisions in relation to the family law arrangements.

 

 

 

Part 2 - Application and transItional provisions

53.     Clause 44 introduces relevant new definitions for this Part.

 

Application - operative time after commencement time

 

54.     Clause 45 provides that the amendments in the Schedule will apply if the operative time of the splitting agreement or splitting order is at or after the time the Schedule commences.

 

Application - operative time before commencement time and Judge not in receipt of pension

 

55.     Clause 46 provides that the amendments proposed in the Schedule 1 will apply to a splitting agreement or splitting order in relation to a superannuation interest of a Judge under the Judges’ Act, if certain conditions are met.  These conditions are:

 

•          the operative time of the splitting agreement or splitting order was before the commencement time ;

•          the Judge was appointed before the commencement time ; and

•          the Judge is not receiving a pension under the Act.



 

Transitional - operative time before commencement time and retired Judge in receipt of pension

 

56.      Currently, any split in a family law settlement of the pension of a retired Judge in relation to a former spouse occurs when payments are made to a retired Judge.  The transitional provisions will have the same effect on the Judge’s pension as under the current arrangements, but will allow for a separate interest for the former spouse to be created from the time the legislation comes into force.  Under the provisions, the former spouse would be entitled to an immediate transitional pension.

 

57.      Under clause 47, these transitional provisions apply in certain conditions, which are:

•          the splitting agreement or splitting order relates to the interest of a retired Judge who was appointed before the commencement time ;

•          the operative time is before the commencement time ; and

•          immediately before the commencement time , the Judge was receiving a retirement pension under the Act; and

•          both the retired Judge and the former spouse are alive at the commencement time .

 

58.     An immediate transitional pension is payable from when the legislation comes into force and is calculated under the item 48 Orders by reference to the transfer amount .

 

59.     An immediate transitional pension is to be paid out of the Consolidated Revenue Fund, which is appropriated accordingly.  This is consistent with the payment of other pensions under the Judges’ Act.

 

60.     The reduction of the retired Judges’ pension is calculated under orders made by the Minister under new section 48.  It is intended that this will be based on the same reduction as applies before the commencement time , which is calculated based on the split in the splitting agreement or splitting order .  However, if circumstances arise where the former spouse dies before the Judge, the reduction will no longer apply to the Judge’s pension from that time.

 

61.     The family law reduction is disregarded where certain events occur.  These are:

•          for the purposes of calculating the reversionary pension to a (subsequent) spouse of a Judge under section 8 when it later becomes payable;

•          in relation to any non-standard pension that may become payable at a later date, which will make sure that, if a child pension becomes payable, the rate of that pension will be calculated as if no reduction of the member pension or reversionary pension had occurred.



 

62.     New subclause 47(7) provides for the splitting of an immediate transitional pension where a splitting agreement or splitting order is made after the commencement time and the agreement or order relates to the immediate transitional pension.  This will apply where the former spouse has another family law split involving a subsequent spouse.

 

Minister may make orders

                    

63.     Clause 48 provides that the Minister may make Orders for the purposes of new transitional provisions and that those Orders will be disallowable instruments.

 

Compensation for acquisition of property

 

64.     Clause 49 provides for a person to claim compensation from the Commonwealth if the operation of Part 2 or the Orders under section 48 results in an acquisition of property from that person otherwise than on just terms.  The compensation amount may be settled in the court if the Commonwealth and the person cannot agree on the amount of compensation.

 

 

 

Schedule 2 - Amendment of the

GOVERNOR-GENERAL Act 1974

 

65.     The Governor-General Act 1974 (GG Act) provides for superannuation allowances to Governors-General and their eligible spouses. Proposed new sections 4AB to 4AG will allow a former spouse of a Governor-General to receive his or her share of the Governor-General’s superannuation allowance as a separate benefit at the time of a family law split.

 

66.     The Schedule introduces a number of new definitions.  These include:

 

Allowance Orders ” means Allowance Orders made under subsection 4AH(1).

 

associate allowance ” means an “ associate deferred allowance ” or “ associate immediate allowance ”.

 

“associate deferred allowance ” means the allowance payable to the former spouse under subsection 4AB(3).  The allowance is deferred if the split occurs during the Governor-General’s term of appointment and the former spouse has not met a condition for payment of the allowance, such as reaching retirement age or being certified as incapacitated.

 

associate immediate allowance ” means the allowance that is payable to the former spouse under subsection 4AB(2).  The allowance commences immediately if the Governor-General has retired at the time of the split .

 

base amount ” means the amount specified in, or calculated under a splitting agreement or the amount allocated under subsection 90MT(4) of the Family Law Act 1975 .

 

family law value ” is the amount the court has determined in accordance with regulations under the Family Law Act 1975 for the purpose of paragraph 90MT(2)(a) of that Act.

 

medical practitioner ” means a person registered or licensed as a medical practitioner under a law of a State or Territory.

 

member spouse ” means the spouse who has the superannuation interest in accordance with Part VIIIB of the Family Law Act 1975 , in this case a Governor-General or retired Governor-General (or spouse of a Governor-General or retired Governor-General).  It can also include a former spouse who is entitled to an associate deferred allowance or associate immediate allowance .

 

non-member spouse ” means the spouse who is not the member spouse in relation to a superannuation interest in accordance with Part VIIIB of the Family Law Act 1975 , in this case the former spouse of a Governor-General, retired Governor-General, spouse of a Governor-General or retired Governor-General or of a person in receipt of an associate deferred allowance or associate immediate allowance .

 

operative time ” in relation to a payment split under a splitting agreement or splitting orders means the operative time for the purposes of Part VIIIB of the Family Law Act 1975 .

 

original interest ” means a superannuation interest in the  GG Act in relation to which section 4AB applies.

 

payment split ” has the same meaning as in Part VIIB of the Family Law Act 1975 .

 

permanently incapacitated ” has the meaning given by subsection 4AC(4).

 

retirement allowance ” means an allowance under subsection 4(1).

 

scheme value ” means the amount determined under the Allowance Orders.

 

splitting agreement ” means the splitting of a superannuation agreement or a flag lifting agreement within the meaning of Part VIIIB of the Family Law Act 1975 .

 

splitting order ” has the same meaning as in Part VIIIB of the Family Law Act 1975.

 

splitting percentage ” means the percentage specified in the splitting agreement under subparagraph 90MJ(1)(c)(iii) of the Family Law Act 1975; or the percentage specified in the splitting order under subparagraph 90MT(1)(b)(i) of that Act.

 

spouse allowance ” means the allowance a spouse is entitled to under subsection 4(2).

 

standard allowance ” means either a retirement allowance , spouse allowance or an associate allowance .

 

superannuation interest ” has the same meaning as in Part VIIIB of the Family Law Act 1975.

 

transfer amount ” forms the basis of an associate deferred allowance or associate immediate allowance and represents the separate interest created for the former spouse.

 

Where a splitting percentage applies, the transfer amount is worked out by multiplying the splitting percentage by the greater of the family law value and the scheme value .  Calculation of the former spouse’s benefit is based on the higher of these values.

 

Where a base amount is specified, the family law value and the scheme value are also calculated.  If the family law value is equal to or more than the scheme value , the base amount will apply.

 

Where the scheme value is higher than the family law value , the transfer amount will be calculated by applying a formula.  The formula applies the whole dollars in the base amount as a proportion of the whole dollars in the family law value and multiplies this by the scheme value .  As for the splitting percentage, calculation of the former spouse’s benefit will be calculated on the higher of the two valuation methods.

 

transfer factor ” is the amount worked out by dividing the number of whole dollars in the transfer amount by the number of whole dollars in the scheme value .  The transfer factor is rounded to 6 decimal places.

 

67.     Clauses 24 and 25 insert minor technical changes to the GG Act as a result of the proposed amendments.

 

68.     Clause 26 inserts new sections 4AB to 4AI into the GG Act.

 

Associate allowance for non-member spouse

 

69.     When the Finance Secretary receives a splitting agreement or splitting order in relation to a superannuation interest under the GG Act, new section 4AB provides for the former spouse to be entitled to an associate immediate allowance or an associate deferred allowance .

 

Note: For ease of understanding, a “ member spouse ” is referred to as a Governor-General, retired Governor-General, spouse of a Governor-General or retired Governor-General or a former spouse who is entitled to an associate deferred allowance or an associate immediate allowance .  A “ non-member spouse ” is referred to as a former spouse of one of these persons.

 

70.     This provision is subject to certain conditions. The conditions are that:

•          both the member spouse and the former spouse are alive at the operative time ; and

•          the base amount must not be more that the family law value or scheme value of the interest.

 

Associate immediate allowance

 

71.     New subsection 4AB(2) provides that if at the operative time the member spouse is in receipt of an allowance (that is, because he or she has retired), the former spouse is entitled to an associate immediate allowance - that is, an allowance that commences from the time of the family law split.  The rate of the allowance is to be calculated under the Allowance Orders by reference to the transfer amount .

 

Note:   the “ operative time ” is the date of effect of the splitting agreement or splitting order - for ease understanding this is referred to as the time of the family law split or time of the split.

 

72.     New subsection 4AB(3) provides that if at the time of the split, the Governor-General is not in receipt of an allowance (that is, because he or she has not yet retired), the former spouse is entitled to an associate deferred allowance - that is, an allowance that is not payable until the former spouse satisfies a condition for payment for the allowance under section 4AC.

 

73.     New subsection 4AB(4) provides for appropriate rounding of the transfer amount .

Associate deferred allowance

74.     New subsections 4AC(1) to 4AC(5) provides for the calculation of, and payment rules for, an associate deferred allowance .

 

75.     The Allowance Orders provide for the calculation of the annual rate of the associate deferred allowance .  The associate deferred allowance is calculated by reference to the transfer amount .

 

76.     New subsection 4AC(2) provides for appropriate rounding of the transfer amount .

 

77.     New subsection 4AC(3) sets out when the allowance is payable.  This is from the from the time of the split and the earliest of one of the following dates:

•          when the Finance Secretary is satisfied that the former spouse has become permanently incapacitated ;

•          on request to the Finance Secretary when the former spouse is aged 60 or over;

•          when the former spouse reaches age 65.

These payment rules allow a former spouse to access his or her benefit based on conditions that are broadly consistent with the payment rules applying to most other superannuation benefits.

 

78.     New subsection 4AC(4) sets out the circumstances in which the former spouse is permanently incapacitated .

 

79.     New subsection 4AC(5) provides that the former spouse may give written notice to the Finance Secretary specifying a day that is not before his or her 60 th birthday.

 

80.     New subsection 4AC(6) provides that if the former spouse dies before the deferred allowance has become payable, a lump sum benefit will become payable to the legal personal representative or, if none can be found, such other person as determined by the Finance Secretary. The Allowance Orders will provide a method of calculating the lump sum.

 

81.     New subsection 4AC(7) provides that the lump sum benefit is payable out of the Consolidated Revenue Fund, which is appropriated accordingly.  This is similar to the arrangements in the GG Act for payment of other benefits.

Application for payment of associate deferred allowance

82.     New section 4AD provides the conditions that must be met before an associate deferred allowance is payable. The former spouse must request that the benefit be paid by written application to the Finance Secretary and provide any necessary information to determine whether the benefit is payable. For example, an application for payment on the grounds of incapacity must be accompanied by relevant medical certificates or other information that the Secretary requires.

Reduction of retirement and spouse allowances payable after operative time

83.     New subsection 4AE(1) provides for the reduction of the Governor-General’s allowance where at the time of the family law split the Governor-General is not in receipt of an allowance, but where a retirement allowance later becomes payable.  That is, this section applies where the split occurs during the Governor-General’s term of appointment.

 

84.     The subsection also applies in the case of where a Governor-General dies before the retirement allowance becomes payable and a spouse allowance becomes payable to a (subsequent) spouse.

 

85.     New subsection 4AE(2) provides the method for the reduction of the retirement allowance .  The reduced allowance is calculated by firstly working out the rate of the allowance under section 4 of the GG Act, disregarding any adjustment under subsection 4(4), and then reducing that rate to the amount calculated under the Allowance Orders .

 

86.     New subsection 4AE(3) applies to a reversionary allowance for an eligible spouse where the Governor-General dies before becoming entitled to that allowance.  To work out the spouse allowance under paragraph 4(3)(b), the rate under 4(3)(a) is reduced to the amount calculated under the Allowance Orders .  That is, the spouse allowance in paragraph 4(3)(b) is based on the reduced allowance because of the family law split and is 5/8ths of that amount.

 

87.     The note under subsection 4AE(3) alerts the reader that the rate of the spouse allowance may be reduced under subsection 4(4) of the GG Act.

 

88.     New subsection 4AE(4) has the effect that the reduction amount is to be taken into account when working out the reversionary allowance for a spouse of a Governor-General under paragraph 4(3)(b), when it later becomes payable.  To work out the spouse allowance under paragraph 4(3)(b), the rate under 4(3)(a) is reduced to the amount calculated under the Allowance Orders .  That is, the spouse allowance in paragraph 4(3)(b) is based on the reduced allowance because of the family law split and is 5/8ths of that amount.

 

89.     The note under subsection 4AE(4) alerts the reader that the rate of the spouse allowance may be reduced under subsection 4(4) of the GG Act.

Reduction of associate deferred allowance payable after operative time

90.     New section 4AF provides for the family law reduction of an associate deferred allowance , where the former spouse of a Governor-General, entitled to an associate deferred allowance , has a family law split with another subsequent spouse.  That associate deferred allowance , when it becomes payable, will be reduced in accordance with the Allowance Orders .

Reduction of standard allowance payable at operative time

91.     New subsection 4AG(1) provides for the reduction of a standard allowance where a family law split occurs when the allowance is being paid.  This includes an allowance being paid to a retired Governor-General, the (subsequent) spouse of a deceased retired Governor-General who has another family law split involving a subsequent spouse, or to the former spouse of a Governor-General who has another family law split involving a subsequent spouse.

 

92.     New subsection 4AG(2) provides that if the standard allowance is not a retirement allowance - that is, it is an allowance being paid to a spouse as an associate immediate allowance or it is an allowance under subsection 4(2) of the GG Act that is being paid to a reversionary spouse of a deceased Governor-General - the rate of the allowance is reduced to the amount calculated under the Allowance Orders .

 

93.     New subsection 4AG(3) provides that if the standard allowance is a retirement allowance , the annual rate of the allowance is calculated by firstly working out the annual rate of the allowance under section 4 of the GG Act, disregarding any adjustment under subsection 4(4), and then reducing that rate to the amount calculated under the Allowance Orders .

94.     New subsection 4AG(4) has the effect that the reduction amount is to be taken into account when working out the reversionary allowance for a spouse of a Governor-General under paragraph 4(3)(b), when it later becomes payable.  To work out the spouse allowance under paragraph 4(3)(b), the rate under 4(3)(a) is reduced to the amount calculated under the Allowance Orders .  That is, the spouse allowance in paragraph 4(3)(b) is based on the reduced allowance because of the family law split and is 5/8ths of that amount.

 

95.     The note under subsection 4AG(4) alerts the reader that rate of the spouse allowance may be reduced under subsection 4(4) of the GG Act.

Allowance Orders

96.     New section 4AG provides that the Minister for Finance and Deregulation may make Allowance Orders for the purposes of the proposed new arrangements and that those Allowance Orders will be disallowable instruments.

 

Compensation for acquisition of property

 

97.     New section 4AI provides for a person to claim compensation from the Commonwealth if the operation of new sections 4AB to 4AG or the Allowance Orders results in an acquisition of property from that person otherwise than on just terms.  The compensation amount may be settled in the court if the Commonwealth and the person cannot agree on the amount of compensation.

 

Technical changes

 

98.     Clauses 27 and 28 insert minor technical changes to the GG Act as a result of the proposed amendments, including providing a mechanism, consistent with that in the GG Act, for the review of decisions in relation to the family law arrangements.

 

99.     Clause 29 provides that the amendments made by Schedule 2 will apply if the operative time of the splitting agreement or splitting order is at or before the time the Schedule commences.