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The Law Reform Commission in 1994 observed that ‘[s]uperannuation has been a source of difficulty, inconsistency and injustice for women in family law’10 and noted that ‘the fact that these issues are being addressed five years after the commencement of the compulsory award- based superannuation indicates that women’s concerns in the private sphere have not been treated as an integral part of the superannuation system.’11 Some seven years later the REM expressed similar sentiments and acknowledged that the existing unsatisfactory approach to superannuation in family law proceedings primarily had a detrimental effect upon women.12 In this environment the FLLA(S)A introduced pt VIIIB into the FLA, a legislative regime supported by the Family Law (Superannuation) Regulations 2001 (Cth) (‘FL(S)R’). This complex scheme is designed to address the inadequacies of the previous legislative and judicial treatment of superannuation in property proceedings. The deficiencies were outlined in the REM as follows:

valuation: there are difficulties in determining the value of superannuation interests, especially defined benefit schemes because the final benefit will depend upon events (eg retirement age, vesting rules, resignation, death, or changes in personal circumstances including remarriage and/or parenthood) that will not be known at the time of the settlement of the parties’ financial affairs. While it is relatively

8 _{Elizabeth Evatt, ‘Valuing Women’s Work — The Role of Family Law’ (Speech delivered at the Anne}

Conlon Lecture, Sydney, 19 July 1991, 4.

9 _{See below 54–9 ` .}

10 _{Law Reform Commission, Equality before the Law: Justice for Women Report No 69 (1994) vol II, [2.32]}

(‘1994 Justice for Women Report’).

11

Ibid.

12 _{Revised Explanatory Memorandum, Family Law Legislation Amendment (Superannuation) Bill 2001 (Cth)}

simple to value an accrued interest in an accumulation plan, valuing an interest in a defined benefit plan is significantly more complicated;13

limited powers of the Family Court: the Family Court does not have clear power under the Family Law Act to make orders directed against third parties (for example, to a trustee of a superannuation fund, directing them to divide a superannuation interest);

legislative restrictions: the superannuation legislation does not allow the division of all superannuation interests between spouses after they have separated or at any other time;

insignificant other assets: in some cases there is no capacity to offset the value of a superannuation interest because there are no other significant assets (for example, equity in the former family home); lack of access to information: information about a superannuation interest is often inaccessible to the non- contributing spouse and there is a real concern that people trade off superannuation interests for other assets without understanding the true value of accumulating income for retirement in a concessionally taxed environment;

impracticality: adjourning property proceedings is impractical except in cases where an interest is shortly to be paid out; and

weight: it has proved difficult for the Family Court to determine the weight to give to a party’s superannuation interest when it is taken into account by the Family Court when considering what orders to make in respect of the property of the parties because of the problems of valuation.14

The difficulty identified by the REM of how the courts determined the weight to be given to superannuation resulted in inconsistency in the treatment of superannuation compared to other assets as well as in the treatment of different types of superannuation.

The deficiencies identified by the REM in relation to the legislative restrictions and limited powers of the courts as well as the information and valuation difficulties resulted in uncertainty about how superannuation would be treated in court proceedings.

Lastly the problems of offsetting superannuation in the absence of other assets and the impracticality of adjourning proceedings were deficiencies identified by the REM which impeded the fair outcomes. The deficiencies highlighted the lack of clarity in the pre-reform treatment of superannuation.

The REM stated that ‘[t]he main objective is to provide a coherent framework for addressing the shortcomings of current arrangements, while taking into account the range and complexity of superannuation plans.’15 Consistent with the main objective the amendments were required to encourage parties to reach their own agreements, to be cost effective and to be consistent with government retirement incomes policy.16 Consequently the legislation sought to attain the following objectives:

• consistent, transparent, fair valuation of most types of superannuation; • guidance for parties agreeing on solutions;

• access to information; • a clean break;

• consistency with retirement incomes policy;

• financial certainty following the separation of parties to a marriage; • ease of administration for superannuation funds.17

13 _{See below 39–42 for a summary of the different types of superannuation including accumulation interests}

and defined benefit interests.

14 _{REM above n 12, 4–5.} 15

Ibid 5.

16 _Ibid. 17 _{Ibid 6–7.}

As discussed18 five of these objectives are relevant to the parameters of consistency, certainty and fairness in the treatment of superannuation. However consistency with retirement incomes policy and ease of administration of superannuation funds are not. After the amendments, on the face of it, superannuation can be treated as property under the FLA in certain circumstances. It can be dealt with outside the court system by way of a complying agreement either as part of a pt VIIIA financial agreement or as a stand alone superannuation agreement. It can also be dealt with by way of court order made by consent or in contested proceedings. Non-member spouses can now obtain detailed information from superannuation funds about the superannuation interests of member spouses and trustees are obligated to provide this information. The FL(S)R prescribe methods for valuing various superannuation interests. These valuation methods rely upon the provision of prescribed information by the funds.

Crucially, the scheme provides for complying orders and agreements about superannuation to bind third party trustees. Thus parties to a marriage and, since 1 March 2009, parties to most de facto relationships19 can enter agreements or obtain orders that will ultimately achieve the split and transfer of superannuation. Also superannuation can be flagged in certain circumstances preventing any dealing by the trustee with the flagged interest until such time as the flag is lifted. These payment splitting and flagging orders and agreements will bind the trustees of superannuation funds.

Furthermore the amendments provide for adjustment of certain splitting orders and agreements in the event of any delay between the commencement of operation of a splitting order or agreement and the time of implementation. Where the order or agreement specifies that a cash amount is to be paid to the non-member spouse from the interest of the member spouse, the trustee is required to calculate and implement any adjustment in due course. Finally, in certain circumstances interest splitting may be a possible option for finalising a payment splitting order or agreement, thus affording a clean break. However, the amendments do not provide guidance about the weight that should be given to superannuation in property proceedings. Nor is guidance provided about when payment splitting is appropriate and in what proportions.

It is important to emphasise the increasing value of superannuation both as an asset for family law purposes and generally as a substantial economic influence. When presenting the draft Family Law Legislation Amendment (Superannuation) Bill 2000 (Cth) to the House of Representatives, the Attorney-General Daryl Williams estimated that the value of superannuation assets would reach $1 trillion by June 2010.20 As of June 2010 the estimate of the total value of superannuation assets was $1.23 trillion notwithstanding the intervention of the global financial crisis.21 Thus the scale of the industry and its capacity for growth underlines the necessity for a coherent family law regime that acknowledges the increasingly valuable nature of superannuation and takes superannuation into account in a consistent, certain way that produces fair outcomes and provides clarity in contested proceedings and guidance in concluding formal and informal agreements.

18 _{Above 9–12.}

19 _{Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 (Cth).} 20

Commonwealth, Parliamentary Debates, House of Representatives, 13 April 2000, 15890 (Daryl Williams, Attorney-General).