Property Settlements

Invalidity Pensions and Family Law

Tindall Gask Bentley Family Lawyer Virginia Bui discusses superannuation and invalidity pensions in a family law context.

Prior to the introduction of the Family Law Legislation Amendment (Superannuation) Act 2001 (Cth) superannuation was not treated as property except for specific cases.  Since the introduction of the legislation, superannuation is now defined as property under the Family Law Act 1975 (Cth) (hereinafter referred to as “the Act”) and can be dealt with pursuant to Court Orders.

The Act sets out the Orders which a Court can make with respect to superannuation interests including the ability to “split” superannuation between a husband and wife.  However, the Act provides that some superannuation interests are unsplittable.  The “unsplittable” interests are defined in the Family Law (Superannuation) Regulations 2001 as being those which are:-

“(i) a lifetime pension or fixed-term pension that the member is no longer entitled to commute; or

(ii) a lifetime annuity or fixed-term annuity.”

Superannuation funds are highly regulated and the fact that there are many types of superannuation funds further adds to the complexity to this area of law.  There are many types of superannuation funds but the most common are accumulation funds, defined benefit schemes and self managed funds.  Regardless of the type of superannuation fund parties have, they will all be taken into account in property settlement.

Sometimes superannuation policies will have other products built in such as cover in the event of Total and Permanent Disability and Life Insurance.  Some of these benefits are career specific such as members of the Police Force or the Military who have traditionally had generous invalidity payments in the event that they are no longer able to work due to permanent medical conditions sustained during the course of their employment of service.  In one sense, it reflects upon the hazardous nature of their occupation.

Invalidity Payments

First and foremost, invalidity payments are not a retirement income.  Put simply, they comprise of compensation and an insurance type payment.  Unfortunately, there is no guidance in the legislation as to how invalidity payments are to be dealt with in property settlement.  Many decisions of the Court have proceeded upon the basis that an invalidity pension is one which is a ‘superannuation interest’ within the meaning of the Act.  This has involved obtaining valuations not dissimilar to the approach taken when considering a party’s interest in a defined benefit scheme.

It appears that the Court’s previous approach has been called into question by His Honour Justice Kent in his recent decision of Burge & Burge [2015] FamCA 178.

When the matter came on before the Court, the parties had reached an agreement in principle with respect to property settlement matters bar one issue relating to the husband’s invalidity benefit through his former role with the Public Service.

In his decision His Honour held that the Commonwealth Superannuation Corporation (formerly known as CommSuper) incorrectly stated in information provided to the wife’s solicitors that the husband was a ‘member’ of the Military Superannuation and Benefits Scheme and was receiving an annual pension under that Scheme.

His Honour then went on to find that that the husband’s invalidity pension which was in question “could not be regarded as a superannuation interest” (at paragraph 7).

The outcome of this decision now has the effect of calling into question whether splitting orders relating to invalidity pensions have resulted in incorrect payments to former spouses.

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