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Thursday, 24 May 2001
Page: 26989

Mr MOSSFIELD (11:34 AM) —I rise to speak on the Family Law Legislation Amendment (Superannuation) Bill 2000. In principle, the Labor opposition supports the stated objectives of this legislation. The bill will amend the Family Law Act 1957 to allow people to divide their superannuation on marriage breakdown in the same way as other assets. The problems associated with superannuation and marriage breakdown have been highlighted on a number of occasions. In 1986 the Australian Institute of Family Studies published a report Settling up, which presented its findings on research conducted into property and income distribution on divorce in Australia.

The report outlined very low levels of membership of superannuation schemes for women compared with men. The study reported that superannuation was not taken into account consistently or clearly in family law. However, under current legislation there are a number of restrictions as to how superannuation can be dealt with in divorce settlements. The Family Court can only deal with property that is owned by the parties at the date of the hearing. Superannuation assets that are only payable on retirement are not considered property unless the superannuation payments have already become payable. The Family Court has overcome this problem by offsetting or adjusting non-superannuation assets by increasing the dependent spouse's share of existing property to compensate for the loss of future superannuation rights, or by adjourning part of the property proceedings until the superannuation benefits become payable and then making an order with respect to those benefits once they become payable.

Both of these examples have faults. Offsetting assumes that the liable spouse has sufficient assets to make good the other's loss of superannuation rights, but that may be insufficient to provide adequate retirement income for the recipient. Offsetting the payout also creates problems, because the perception is often that the party that receives the smaller share has been somehow short-changed, even though they would retain all their superannuation benefits.

In the highly charged and often emotional atmosphere of divorce settlement, perceptions are very important, because the wrong perception—the idea that you may have been ripped off somehow—is a powerful one that is not easily quelled. So offsetting the non-superannuation assets to compensate for the loss of future superannuation rights is problematic at best.

Adjournment of the property settlement means that financial issues between spouses remain unresolved. Again, in highly emotional and often acrimonious divorce settlements, this can have a devastating effect when a clean break is needed so that both partners can get on with building their new lives. The last thing either needs or wants is continuing involvement in a financial arrangement, particularly if it may not be settled for years. Final payments of benefits may also depend on events outside the control of the eligible spouse, such as the liable spouse dying before becoming entitled to benefits.

The Family Law Legislation Amendment (Superannuation) Bill 2000 before the parliament is broadly consistent with directions announced by the government in May 1998 in a position paper on superannuation and family law and with a further discussion paper on property and family law, released in March 1999. The 1998 position paper, `Superannuation and family law', proposed a new regime for dealing with superannuation interests after separation. It proposed that superannuation benefits accrued during the period of the marriage would be split fifty-fifty between the parties. Each party would then take a separate share of the accrued superannuation assets, either by transfer of money into a different fund or into a separate account with the same fund. This position paper places heavy emphasis on the formation of private settlement of superannuation issues by the parties themselves. The fact that the Family Court would have the power to split superannuation assets equally would encourage the parties to reach a private agreement.

In the discussion paper released in March 1999, two options relating to the system of property division in divorce proceedings are considered. The first is a continuation of the current separate property regime but with a starting point of equal sharing, based on an assumption of equal contribution. In the second proposal, certain properties would be classified as community property to which each party would have an equal entitlement. Superannuation would be divisible under both options. Under the first, it would be divided in the same way as other property and would not be singled out for special treatment. Under the second option, the government proposal of a fifty-fifty split would be applied, but with the Family Court having the discretion to depart from an even split if the amount of superannuation is too small to divide, if multiple superannuation interests are held by the parties or if it would otherwise be necessary to sell the family home, causing disruption to the care of children, or to sell a business which would reduce the earning capacity of one of the parties.

Another report which needs to be considered in framing legislation relating to family law is that referred to as the Australian divorce transition project of the Australian Institute of Family Studies. This study looked at superannuation in divorce, and one of its important findings was that superannuation entitlements are still unevenly distributed between genders, in favour of men. The study found that 76 per cent of men had superannuation entitlements on divorce, while only 34 per cent of women did. The absolute value of parties' superannuation at divorce depends on a range of factors. Age at divorce is the key factor, but asset wealth, time out of work and the number of children are all significant.

However, the effect of these factors is not the same for women and men. The more children there are, for example, the lower the value of the woman's superannuation, while the value of the husband's superannuation increases in line with the number of children. Superannuation is considered as taken into account or explicitly divided in only a minority—46 per cent—of cases. These facts support the need for some legislative guidance in the distribution of superannuation assets in divorce proceedings.

At this point, I would like to refer to an issue raised with me by a lady constituent. I think it is important that we actually consider real life facts in this debate. Due to changes in his employment, the estranged husband of this constituent took out a personal loan to join a superannuation fund. The loan has been repaid, and I am advised that the superannuation fund is now worth a considerable amount. Following the breakdown of the marriage, a conference was held to deal with the couple's assets. At this conference, my constituent was advised that her application to have the property and superannuation divided would be dismissed in court. The reason for this was that the property of the marriage was of minimal value, as would be determined by the Family Court. Therefore, any amount that my constituent might be entitled to from the superannuation part of the settlement could not be given to her by way of property, furniture, land, house, et cetera. Superannuation, under the current Family Law Act, is not determined as property of the marriage. Therefore, the court has no jurisdiction to make an order that she be allocated a percentage of the superannuation as the wife of the marriage, although it is recognised that, while she was the wife, she contributed significantly to her husband's superannuation fund—it was agreed by the husband and the wife that the wife did make a significant contribution. However, the husband insisted that, because the superannuation under current family law is not considered property, he did not have to divide the superannuation and allocate a share to his wife.

Following this conference, the husband filed for divorce immediately as, under the current law, if either party files for divorce, any application for the division of superannuation is not applicable 12 months after the divorce is finalised. My constituent has made a significant contribution to her husband's superannuation, by assisting him with paying off the loan taken out to allow him to join the fund, by working at home raising the three children while he was at work and also by working shiftwork.

Arising out of her predicament, my constituent raises a number of questions for me. Firstly, if there is limited property, as in my constituent's situation, will people in that position be able to have an order made to allocate superannuation? Therefore, will superannuation be seen as something both a husband and a wife contribute to in a marriage? Secondly, what will happen to people in my constituent's position if the legislation is not applicable by the time the 12-month period has expired? Will there be some type of bridging legislation so that people like my constituent do not fall further through the cracks in the legislation? When this legislation is passed, what happens if—as is possible in my constituent's case—the 12-month period has expired? Will there be some avenue to pursue a fair and equitable settlement of superannuation? Will the current time period of 12 months to make an application for settlement of assets after divorce be extended? My constituent also raises the issue of the super fund being accessed for the purpose of purchasing a family home. This would be an important issue for people such as my constituent—a single mother raising three young children.

The area of family law is one that is surrounded by controversy. It causes great anguish and distress to many parties who are forced to make use of the family law system. Nevertheless, it has filled an important place in the Australian community from the time it was first introduced back in the days of Senator Lionel Murphy. The issue of the break-up of families and the hurt and bitterness that this often causes exercises the mind of all federal members of parliament— whichever party they happen to belong to— almost every day as we deal with our constituents

Some time ago I chaired a public seminar in Blacktown organised by the Child Support Agency, and there were nearly 300 people present in the Blacktown RSL that night. I thought I was the attraction, but as the meeting progressed I was glad I was not the attraction. Many of the people in attendance were angry mums and dads, each believing that they had been on the wrong end of the system and had been dealt with poorly.

Whenever family break-up ends up in a court of law there are inevitably going to be winners and losers, and in this area the so-called losers often become extremely agitated. This bill is taking up the issue of the division of property and, while it is interesting to note that there is no arbitrary rule being enshrined in the legislation, it is intended to leave the actual decision up to the parties involved.

In the long run this will once again lead to the intervention of a judge of the Family Court being required to arbitrate, because that is the way human beings operate in this very emotionally charged atmosphere of a broken relationship and a division of property. Often, parties to a divorce are in no position emotionally to make the kind of rational and dispassionate decisions needed in this type of situation. In an atmosphere of accusation and recrimination, there is little chance of calm and just settlement being arranged. This of course is not the case in all circumstances. Unfortunately, though, it happens far too often. Hence the need for the Family Court and legislation such as this, being but one step in what should be a long reform process that overhauls the whole system.

The high-sounding aim of this bill is to give separating couples the ability to divide their superannuation by agreement. People will be able to determine in what proportions their superannuation will be divided, if at all. People will be able to trade off superannuation for housing where one parent needs to remain in the marital home to care for children. This is good in principle and of course applies to couples where only one is in paid employment or where both are in paid employment. More often than not it will be the ex-wife who may not have been in paid employment but who has remained at home with the children on home duties who will be the recipient of such divisions of superannuation. Nevertheless, I am confident that there will be some vigorous resistance on the part of some partners who will not wish to allocate any part of their superannuation entitlements to an ex-partner.

At this stage, I have no doubt that the legal eagles will don their wigs and gowns and launch into their very expensive arguments for and against the proposals on behalf of their respective clients. Under the current law, the Family Court has no power to divide superannuation when a marriage breaks down, even if the separating couple wants to split superannuation in their settlement. The bill provides that the Family Court or, in some circumstances, the Federal Magistrates Service will be required to make a decision that is just and equitable in the circumstances. And here I come back to my argument: I am sure that many if not the overwhelming majority of decisions made by the learned judges to date have been just and equitable in all the circumstances. It is just that the party who objected in the first place will never concede that point and the mental anguish becomes like an internal serpent, squirming around and aggravating their system.

The need for the implementation of a family law system was self-evident, and its introduction has in many cases forced people to accept their proper responsibility for life decisions that affect their former families. We cannot ever legislate for the mind, and it is in the minds of the warring parties that we need to try and provide proper education and understanding of the basis of the system that they operate under. We cannot go back to the bad old days of irresponsible partners splitting up and leaving their family with no support and no way of obtaining it. Nevertheless, we do need a legal system that has some transparently obvious flexibility within it that can be shown to the disagreeing parties.

At the end of the day we need to create as peaceful a solution to the trauma and anguish of marital break-up and property settlement as is humanly possible. This bill does attempt to do that in its own way, but I am confident that there will be as many critics of it from the users of the system as there are supporters. That seems to be the nature of the Family Court system—we are damned if we do and damned if we don't. Every reform that is made of the Family Court system will have its supporters and its critics.

This is by far the most emotional area of the law and, unfortunately, the law and emotion mix together about as well as oil does with water. We must, nevertheless, try to make the changes necessary to this system to bring equity, justice and ultimately peace of mind to these very troubled circumstances.

In its concluding comments, the Bills Digest refers to a number of difficulties that would exist in the absence of an agreement between the parties as to how superannuation entitlements are to be split. One is that the draft regulations reflect the complexity of the division of superannuation when the final value is unknown. The draft regulations contain a number of formulae on which a distribution could be based, but these formulae would require professional analysis to understand their implications.

Great difficulty would also arise in determining the value of interest in deferred benefit schemes. Issues such as the assumed retirement age, final average salary and the actual and potential term of membership of the spouse would all have to be considered. The issue was also raised that lawyers may not be sufficiently trained to understand and deal with the complex actuarial calculations. There is the issue of cost to the funds of complying with the requirements of the bill and as to whether these costs are to be borne by the persons involved or by the funds themselves.

The final point I want to make, a point that is made in the Digest's concluding comments, is that, in the event of a reconciliation after the interests have been split, it is suggested that the parties would have to retain separate accounts, thus incurring fees and charges for each account with possibly lower final combined benefits. However, if there were a flagging order, it would be possible for the nonmember spouse to lift the order if a reconciliation took place. These are some of the interesting points still to be resolved but which may in fact encourage the parties to reach agreement rather than get tied down in costly legal arguments.