Aquellas que producen un isótopo del elemento original.

Part VIIIB div 3 sets out the relevant provisions applicable to payment splitting or flagging by court order and is intended to apply in default of parties entering an agreement about superannuation. The seminal provision states:

90MS(1) [Property orders may include superannuation interests] In proceedings under section 79 or 90SM with respect to the property of spouses, the court may, in accordance with this Division, also make orders in relation to superannuation interests of the spouses.

Note 1: Although the orders are made in accordance with this Division, they will be made under either section 79 or 90SM. Therefore they will be generally subject to all the same provisions as other orders made under that section.

Note 2: Sections 71A and 90MO limit the scope of section 79.

Note 3: Subsections 44(5) and (6) and sections 90SB, 90SK and 90MO limit the scope of sections 90SM. 90MS(2) [Order must comply with this Part] A court cannot make an order under section 79 or 90SM in relation to a superannuation interest except in accordance with this Part.269

The REM verifies that s 90MS is intended to elucidate the relationship between the operation of s 79 and pt VIIIB and explain the limitations upon making superannuation orders because there was uncertainty about this issue expressed during the consultation process.270 Thus an order about a superannuation interest cannot be made where there is a superannuation agreement in force, where a waiver notice has been served upon the trustee or where a payment flag is operating on the interest.271 Also pt VIII, and therefore pt VIIIB, does not apply where a financial agreement covers financial matters or resources.272

Section 90MS clarifies that pt VIIIB is intertwined with pts VIII and VIIIAB rather than a separate regime. Coupled with s 90MC which requires superannuation to be ‘treated as’ property for the purpose of the definition of ‘matrimonial cause’ and ‘de facto financial cause’,273 the intention appears to be that superannuation is to be dealt with in the same way as other property in property proceedings but subject to the specific requirements of pt VIIIB. These provisions facilitate the valuation, flagging and splitting of superannuation. The nature of these provisions and the relationship between s 79 and pt VIIIB has, however, been the subject of complex case law. Before examining this case law about the implementation of pt VIIIB, an overview of the technical provisions relating to the making of orders about superannuation is required.

A Forms of Payment Splitting Orders

The amendments enable splitting orders to be made if the superannuation interest is an interest of the type to which pt VIIIB applies, if the payment is not an unsplittable payment and if the interest is not prescribed as an unsplittable interest.274 Orders about superannuation can be made in relation to the majority of superannuation interests. Like agreements about superannuation, orders about superannuation cannot be made at large and although the

269 _{FLA s 90MS (emphasis added).} 270 _{REM, above n 1, 29.}

271 _{FLA s 90M0.} 272

Ibid s 71A.

273 _{Ibid s 4(1) (definitions of ‘matrimonial cause’(ca), ‘de facto financial cause’(c)).} 274 _{See above 73–4.}

permissible forms of splitting order are intended to be similar,275 there are differences. In essence two types of orders can be made in relation to interests that are not percentage-only interests and two for percentage-only interests with some overlap.

1 Type (a) Orders (Non Percentage Only Interests)

The first type of order that can be made about non percentage-only interests is commonly referred to as a type (a) order,276 or a base amount splitting order.277 This type of order envisages that a base amount be allocated to the non-member out of the interest of the member spouse.278 The amount of the base amount must not exceed the value of the interest of the member spouse279 and is payable when the entitlement is paid to the member spouse in due course. If there is a delay before the interest is paid to the member spouse the base amount must be independently adjusted in accordance with pt 6 FL(S)R. There is no specific definition of base amount. By inference it is a cash amount.280 However, from time to time type (a) orders have been made on the basis of a percentage although this has not been the subject of considered analysis and would appear to be incorrect.281 Section 90MT contains no equivalent provision to s 90MJ(1)(c)(ii) which allows an agreement to specify a method by which the trustee will calculate a base amount.

The type (a) order is not available for percentage-only interests, because, as discussed, the only appropriate approach to these interests is to divide the payments by reference to a percentage.282 The type (a) order is usually appropriate where the superannuation interest is still in the growth phase. The member spouse may wish to continue to contribute to the fund and the type (a) order will fix the entitlement of the non-member spouse, apart from the adjustment of the base amount pursuant to the FL(S)R, with the result that the non-member spouse will not continue to benefit from the ongoing contributions of the member spouse. If the interest is in the payment phase and is received by way of pension payments then the type (a) order would be difficult to implement283 but may be possible.284

2 Type (b) Orders (Non Percentage-Only Interests and Percentage-Only Interests)

The second type of splitting order is a type of percentage splitting order. The type (b) order285 is available for percentage-only interests as well as non percentage-only interests and is an order that would usually be made if the interest is in the payment phase.286 The effect of the order is that the non-member spouse would be entitled to receive a specified percentage from each of the splittable payments paid to the member spouse whether they are lump sum or pension payments or both.The entitlement of the member spouse is reduced by that amount. If the interest is in the payment phase the member spouse has ceased to contribute and no

275 _{REM, above n 1, 29–30. Cf FLA ss 90MJ, 90MT.}

276 _{Watts, Bourke and Taussig, above n 29, 153 coined the terminology type (a), (b) and (c) orders.} 277 _{FLA s 90MT (1)(a).}

278 _{Ibid s 90MT(4).} 279

Ibid.

280 _{FL(S)R reg 45(2) provides that if the base amount includes a part of a dollar it should be rounded to the}

nearest whole dollar.

281 _{See, eg, Hayton & Bendle [2010] FamCA 592 [24]–[25] where the form of the order appeared to be required}

by the fund and was sought by consent.

282 _{Above 77–8.}

283 _{Watts, Bourke and Taussig, above n 29, 155 although the authors opine that it would be theoretically}

possible.

284

FL(S)R reg 55(c).

285 _{FLA s 90MT(1)(b).} 286 _{REM, above n 1, 30 [165].}

issue arises of the non-member spouse benefiting from any ongoing contributions of the member. The quantum of the percentage will reflect the entitlement of the non-member spouse in the circumstances of each case. If this type of order is used in the growth phase then the non-member spouse will benefit from any ongoing contributions until such time as the order is implemented to the disadvantage of the member spouse. This type of order replicates the similar option in relation to agreements.

3 Type (c) Orders (Percentage-Only Interests)

The third type of order is the type (c) order which is a second type of percentage splitting order that is only available for percentage-only interests.287 The effect of this type of order is that only a portion of the accrued entitlement is paid to the non-member spouse.288 This is calculated by ascertaining the accrued benefit multiple as at separation and also as at the time of payment. The accrued benefit multiple as at separation will be fixed so that the non- member spouse will not receive the benefit of any post separation increase in the accrued benefit multiple which would increase the value of the interest. A similar option is available for agreements.289 The REM clarifies that the policy intention of the type (c) order is that the parties be able to split by percentage that portion of the interest built up during the course of the marital relationship.290 This option would generally be used where the interest has not attained full vesting and has therefore not undergone the extreme increase in value characteristic of these types of interests.

4 Operative Time Requirements — Splitting Orders

Unlike splitting agreements the operative time for splitting orders is not prescribed but is defined to be the time specified in the order.291 It is the time when the trustee must recognise the order and, in appropriate cases, implement it. In the case of a base amount splitting order, the trustee must commence adjusting it until such time as the splittable payment is payable or until interest splitting occurs. The operative time can be retrospective for splitting orders292 but not for splitting by agreement.293 It would generally be practical to have the date of valuation of the interest as the operative time294 but in Stevens & Stevens295 the Full Court found no error in the Federal Magistrate appointing an operative time that was four days after the date of the order in a case where both parties sought an operative time shortly after the date of service of the orders on the trustee.296

5 Other S 90MT Issues

In summary, the legislation enables payment splitting orders to be made.297 A splitting order must be either a base amount splitting order or one of two types of percentage splitting order. The type of order that is appropriate depends upon the type of interest and whether the 287 _{FLA s 90MT(1)(c).} 288 _{Ibid s 90MT(1)(c), FL(S)R reg 26.} 289 FLA s 90MJ(1)(b)(i). 290 _{REM, above n 1, 30 [168].}

291 _{FLA s 90MD (definition of ‘operative time’).}

292 _{See, eg, A & A [2006] FMCAfam 80 [123]–[125], [175]; Dowdell & Public Trustee (NT) [2007] FamCA}

1276 [134].

293 _{FLA ss 90MI, 90MK, 90MLA(2)(c).}

294 _{Wilkinson & Wilkinson (2005) FLC ¶93-222, 79,682–3 [62] (‘Wilkinson’).} 295 _{(2005) FLC ¶93-246 (‘Stevens’).}

296

Ibid 80,041 [47].

297 _{But see Wilkinson (2005) FLC ¶93-222, 79,683 [63]–[65] where the Full Court agreed that an order drafted}

entitlement is in the growth phase or the payment phase. In this respect the provisions are broadly similar to the provisions governing agreements about superannuation. The provisions governing orders about superannuation do not permit an order that specifies a method for calculating a base amount, an option which is available in respect of agreements.

Before making a splitting order the court is required to value the interest pursuant to the FL(S)R if the regulations provide for a method of valuation,298 or pursuant to an alternative method of valuation approved by the minister299 or by such other method as the court considers is appropriate.300

Finally, the court is given specific power to make such orders as it thinks necessary for the enforcement of splitting orders.301 It would appear that enforcement of splitting orders may also be undertaken pursuant to the general power to enforce decrees in addition to the specific power.302

B Flagging Orders

The amendments also give the courts the power to make flagging orders in relation to superannuation that is not in the payment phase.303 A flagging order prevents a trustee from making a splittable payment304 in respect of the flagged interest without the leave of the court.305 It therefore provides no clean break.306 The trustee must notify the member spouse and the non-member spouse within the time specified in the order of the next occasion when a splittable payment becomes payable in respect of the interest.307

When considering a flagging order ‘the court may take into account such matters as it considers relevant and, in particular, may take into account the likelihood that a splittable payment will soon become payable’.308 This is not a requirement for flagging agreements. The court may consider it preferable, where superannuation is due to be paid soon, to defer any decision about superannuation by means of a flagging order309 and rather than rely on a valuation pursuant to the FL(S)R, await the actual value of entitlements such as defined benefit interests or partially vested accumulation interests.310 The basis for flagging interests is not, however, confined by the legislation to these circumstances and has the potential to be of broader application.311 Also a flagging order must be just and equitable.312

Once the trustee advises the member spouse and the non-member spouse of when the next splittable payment becomes payable the notification should trigger a relisting of the

298

FLA ss 90MT(2)(a), (2A).

299 _{Ibid s 90MT(3); FL(S)R regs 38, 43A.}

300 _{FLA s 90MT(2)(b). See, eg, Trott (2006) FLC ¶93-263 for an example of the complexity that can result.} 301 _{Ibid s 90MT (1)(d). See generally, Bourke, Super Splitting for Family Lawyers, above n 218, 265–8.} 302 _{FLA s 105; Bourke, Super Splitting for Family Lawyers, above n 218, 265–8.}

303

FLA s 90MU.

304 _{But see FLA s 90MUA.} 305 _{Ibid s 90MU(1)(a).}

306 _{Bourke, Super Splitting for Family Lawyers, above n 218, 243–4.} 307

FLA s 90MU(1)(b).

308 _{Ibid s 90MU(2).}

309 _{REM, above n 1, 31 [180]–[181].}

310 _{Watts, Bourke and Taussig, above n 29, 165.} 311

Tom Altobelli, ‘Children’s Accommodation Needs & The Impact of the New Super Splitting Reforms’ (Paper presented at the Mid North Coast Regional Law Society Seminar, 13 September 2003) 4.

proceedings by one of the parties. The member spouse will want the flag to be lifted and the non-member spouse will seek a splitting order.

Generally a flagging order is an alternative order to a splitting order. However, in BAR v JMR313 a flagging order was made in conjunction with a splitting order. There the only outstanding issue was the superannuation entitlement of the husband which had been adjourned pursuant to s 79(5). A type (b) order was made in favour of the wife. A flagging order was also made to ensure that the leave of the court was required before the trustee could make a splittable payment in respect of the interest. This unusual step was taken to achieve a taxation advantage for the wife by preventing interest splitting occurring before the husband satisfied a condition of release. The intention was to ensure that the wife received her entitlement when the interest entered the payment phase instead of in the growth phase so that her entitlement ultimately received the same taxation treatment as her husband’s entitlement. This is a novel if perhaps unintended use of the flagging order. No clean break was achieved and the flag would have to be lifted in due course.

The issue of the nature of a flagging order was considered further in Mary & William314 a case where the husband advanced the argument that a flagging order is a final order under s 79 and not an interlocutory order made to protect the interest until a splitting order can be made. Benjamin J examined the REM and the terms of s 90MU and concluded that a flagging order ‘can only be an interlocutory order’.315

Anecdotally it has been suggested that a flagging order could be used as an enforcement tool against non compliance with an order, for example, for the payment of money where there is no other security against default. This view has not gained currency. Indeed flagging orders are infrequently made perhaps because the flag must be dealt with in due course. There is therefore no clean break and no final determination of the financial relationship between the parties. Flagging orders entail further expense for the parties, in particular, if the relationship between the parties is such that a consent order is unlikely to be made. Also there may be issues about circumstances intervening to the detriment of the non-member spouse. This may in part explain the unpopularity of this type of order.

C General and Miscellaneous Provisions

The balance of pt VIIIB outlines provisions relating to trustee rights and obligations and miscellaneous matters.

1 Cancellation of Payment Splits / Waiver of Rights

The court has the power to make an order terminating a payment split where the relevant superannuation agreement is no longer in force and the non-member spouse has not served a waiver notice upon the trustee.316 The order terminating a payment split only applies to splittable payments made after the order is made and not before.317 This type of order would generally be made where the trustee has paid out the entitlement of the non-member spouse. Usually a prescribed waiver notice is signed by the non-member spouse in exchange for payment made in satisfaction of a splitting agreement. The effect of this is that the non- member is no longer entitled to receive any payment from splittable payments payable after 313 _{(2005) FLC ¶93-231, 79,861.} 314 _{(2006) FLC 93-295.} 315 Ibid 81,010 [46]. 316 _{FLA s 90MV.} 317 _{Ibid s 90MV(2).}

the date of the notice.318 To be effective the waiver notice must be accompanied by a statement and certificate, signed by a prescribed financial adviser, to the effect that the non- member spouse has had independent financial advice about the financial effect of the waiver.319 However, if the waiver is not signed, then the court has the power to terminate the payment split in relation to ongoing splittable payments. These provisions anticipate that funds may wish to take steps, outside the splitting regime, to terminate their obligation to the non-member spouse by transferring or rolling over funds or paying a lump sum in satisfaction of a payment split, to avoid the ongoing administration of the entitlement that would otherwise ensue.320

2 Deductions from Splittable Payments

Before calculating a payment split any deductions that the trustee is entitled to make must be deducted from the splittable payment.321 A superannuation surcharge deduction is the type of deduction appropriately made from the splittable payment before calculating the payment split.322

3 Multiple Payment Splits

It is possible for one interest to be subject to more than one payment split because the member spouse has married, or been in a de facto relationship, and separated more than once. The trustee is required to implement payment splits in order of operative time, implementing the earliest in time first323 and after that applying the next in time to the balance and so on if there are more splits.324 The member spouse is then left with the balance after the multiple payment splits have been deducted which could ultimately be inadequate to the retirement needs of the member. This provision could operate to the detriment of a party having the benefit of a pre- startup time order about superannuation.

After the de facto reforms an added complication is that the trustee may be required to implement splitting orders in relation to a married non-member spouse and de facto non- member spouse or two de facto non-member spouses at the same time.

4 Fees Payable to Trustees

Trustees may charge reasonable fees in respect of an application for information, splitting, flagging and almost every conceivable action undertaken in relation to the operation of pt VIIIB.325 Generally fees are paid equally by the member spouse and non-member spouse326 with two exceptions. Firstly, if the non-member spouse is to receive the whole of each splittable payment then the non-member spouse pays the whole fee.327 Secondly, where an application is made for information the applicant pays the fee. 328 If any fee remains unpaid then the trustee is empowered to deduct it from the share of the superannuation interest of the

318

Ibid s 90MZA; FLSR reg 60, sch 1, Form 5.

319 _{FLA s 90 MZA(2), FL(S)R reg 60(2)(a),(b).} 320 _{Watts, Bourke and Taussig, above n 29, 298.} 321 _{FLA s 90MW.}

322

REM, above n 1, 31 [186].

323 _{FLA s 90MX(2).} 324 _{Ibid s 90MX(3).}

325 _{Ibid s 90MY(1); FL(S)R reg 59(1).} 326

FL(S)R reg 59(2)(a)

327 _{Ibid reg 59(2)(b).} 328 _{Ibid reg 59(3).}

liable person. 329 A broad spectrum of generally modest fees has been levied by superannuation funds.330. The court has the power to determine the issue of reasonableness of