The committee received 10 submissions, with all submitters except the Australian Brotherhood of Fathers expressing support for the bill.
The Australian Brotherhood of Fathers was opposed to:
the establishment of a referral power from Western Australia to the Commonwealth in respect of superannuation matters in family law proceedings for separating de facto couples in Western Australia; and
the extension of federal bankruptcy jurisdiction to the Family Court of Western Australia.
The Australian Brotherhood of Fathers’ opposition to the bill was based on its view that the bill seeks to ‘align Western Australia further with a system that…is flawed and in need of major reform’. The Brotherhood submitted:
It is increasingly our experience that the Family Law system of asset division, spousal support and subsequent child support regime can project fathers into financial insecurity, poverty and distress.
In its view, superannuation is ‘inequitably distributed in the property settlement process’ under the current federal regime. As such, the Australian Brotherhood of Fathers is lobbying for reform in this area.
All other submitters expressed support for the reforms contained in the bill, suggesting they would end an inequity inherent in the Western Australian system of family law. The Family Court of Western Australia contended:
…women in de facto couples in Western Australia have been particularly disadvantaged, as superannuation entitlements in de facto property settlements are treated differently in Western Australia to those of married couples in Western Australia and all couples in the rest of Australia. The Bill will amend this anomaly.
The Family Law Section of the Law Council of Australia (the Law Council) pointed out that superannuation is often ‘a significant asset’ in property settlements, and stated its view that ‘it is only proper’ for separating de facto couples to be treated the same across Australia. The Law Council added:
This legislation will give separating de facto couples in Western Australia more options when deciding how to divide their assets at the end of their relationship, and in particular, will have the effect of both partners being able to provide, at least in some part, for their retirement, by allowing an equitable division of superannuation.
The ‘opt-in’ mechanism
While most submitters supported the bill, a number of key stakeholders expressed concerns regarding the transition arrangements contained in Schedule 4. These stakeholders were concerned that the transitional arrangements may disadvantage the financially-weaker party because they require parties in matters that are already before the courts to agree if they wish the provisions to apply to their settlement (‘opt-in’ to the new regime).
The bill includes an opt-in mechanism at Item 3(2), which allows parties to choose for Part VIIIC to apply to their proceeding, if both parties agree. Opting-in requires that the choice is made in writing and signed by both parties, after having received independent legal advice about the advantages and disadvantages of the decision.
The Attorney-General’s Department (the department) submitted that the opt‑in mechanism:
…seeks to balance the potential unfairness that may result if a party with proceedings on foot is unable to access the new regime, with the recognition that enabling one party to unilaterally apply for superannuation splitting to be included in property proceedings that are already underway may engender additional financial costs to both parties and delay the finalisation of proceedings.
However, key stakeholders suggested the opt-in provision does not strike the right balance and would likely lead to unintended consequences.
The Law Council explained that the issue of superannuation splitting for de facto couples in Western Australia has attracted ‘significant’ attention in the WA media recently. As such, people are ‘undoubtedly’ waiting for the law to change prior to lodging their applications, particularly in cases where superannuation is the major asset. However, the Family Court Act 1997 (WA) imposes a time limit of two years after a relationship ends to make applications. This, the Law Council argued, ‘may force applications to be made prior to the commencement date, which may mean that some couples will not be able to take advantage of the changes to the legislation’.
The Family Court of Western Australia (WA) submitted:
As currently drafted, a number of women potentially will continue to be disadvantaged, and inequitable splits of property will continue to result, in particular those women involved in pending de facto financial proceedings in the [Family Court of Western Australia], and any proceedings that are commenced between now and when this legislation (and no doubt the legislation that will need to be introduced by the WA Government to support the operation of the Bill) takes effect.
The committee received a submission from a woman who stated that she is likely to be personally impacted if the bill is not amended. The submitter, who has proceedings on foot in Western Australia, alleged that her former de facto partner transferred significant wealth into superannuation in order to minimise the share of wealth she would receive.
The submitter said that she believed herself to be one among many in a similar situation, and explained:
My lawyer has recently informed me that while there is an intention to amend the legislation to allow Superannuation to be split between de facto couples in Western Australia, as it is currently drafted, that legislation would exclude me and anyone else who already has proceedings before the court… I cannot see…why it would be useful to prevent people already before the court from having access to a mechanism that will likely help them resolve matters, and where the absence of such a mechanism will certainly lead to a greater unfairness, particularly against women.
West Australian family law specialist, Mr Samuel Fahey, said he believed the opt-in provision would:
Cause an influx in applications to the Court from parties who hold a large proportion of their wealth in superannuation (whether it has been held that way legitimately or is placed there in anticipation of separation)…
According to the Family Court of WA, the transition arrangements in the current bill are inconsistent with the intention of the 2001 amendments to the Family Law Act 1975 (Cth) which introduced superannuation splitting. The Family Court submitted:
…the superannuation amendments applied to all marriages, and only did not apply if there was a finalised property settlement which was not subsequently set aside. This meant it could apply to parties to a marriage who had proceedings which had not yet been finally determined by the Court when the said Bill was introduced on 13 April 2000, and subsequently passed in 2001.
While the Court acknowledged that opt-in arrangements have been used in some circumstances in the past when superannuation splitting has been incorporated into the family law regimes of various states, it argued that this approach would not be beneficial in this case. One reason is that the law will take ‘considerable’ time to come into effect, and:
Parties, in particular, the ‘member’ spouse, may well take advantage of this delay, and commence proceedings, thereby effectively ensuring the regime to allow their superannuation to be treated as property is not available to the ‘non-member’ spouse.
The Court added that, even in cases where both parties choose to opt-in to the new regime, the requirements ‘could be unnecessarily onerous on a party who may be in difficult financial circumstances (usually the woman)’, because both parties are required to obtain independent legal advice on the benefits of opting-in, adding to legal costs.
The Family Law Practitioners Association of WA proposed that the opt-in mechanism fails to meet the intent of the legislation, which is to ‘overcome inequity in cases where the inability to super split leaves one party without access to the appropriate property entitlement’. The Association wrote:
…we do not support the requirement for a process which places the disadvantaged party at the mercy of the advantaged party consenting to the amendments applying…It is entirely adverse to the purpose of the legislation and in our view perpetuates the inequity of the financially weaker party where there is no real benefit (as in, for example, the need for certainty with existing orders).
This view was echoed by the individual submitter, who was concerned that the opt-in provision would ‘provide an incentive’ for financially-stronger partners in de facto relationships in Western Australia to commence proceedings immediately to avoid splitting their super. The submitter added: ‘This cannot be the intention’.
The Law Council proposed an amendment to address these issues:
It is therefore submitted that the Bill should be amended so that it is not the date upon which an application is filed which determines if superannuation of de facto couples can be split, but instead the date upon which the relevant final order is made.
Similarly, the Family Law Practitioners Association of WA submitted:
The Association is of the view that this proposed ‘choice’ mechanism will cripple the Court’s ability to ensure a just and equitable result in cases without joint consent. For that reason, the Association submits this mechanism should not be included and instead the legislation should apply to any matter which is yet to be finally determined on the commencement date.
The department acknowledged submitter concerns, and said that setting transitional provisions ‘necessitates the balancing’ of a number of factors. Factors taken into account by the department included:
providing ‘certainty’ for parties with cases on foot;
avoiding delays and increased costs for these parties; and
consistency with previous similar changes made in family law.
The department explained that the opt-in approach was:
…consistent with the approach taken when Part VIIIAB of the Family Law Act 1975 (Cth) (FLA), which relates to all de facto financial matters, was extended to de facto couples in jurisdictions by the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008.
However, the Family Court of WA argued that the legal situations are markedly different, that ‘automatic application’ approaches have also been used in similar legislation, and that the detriments to financially-weaker parties (generally women) of using the opt-in model in this case would likely outweigh any benefits.
The Law Council was also concerned that the bill does not contain express provisions to prevent existing financial agreements being impacted by the new legislation. Division 3 of Part 5A of the Family Court Act 1997 (WA) enables parties to enter into financial agreements before, during or at the end of de facto relationships, and many of these financial agreements are currently in place. The Law Council argued these should not be affected.
The Law Council explained:
…if an existing de facto couple’s financial agreement does not definitively deal with each party’s superannuation interest (as a financial resource) then a party may be able to apply under the [Family Law Act 1975 (Cth) (FLA)] for a division of superannuation, notwithstanding an existing financial agreement under the FCA. If that is indeed the case, there may be a number of applications to set aside existing de facto financial agreements, if they are ambiguous with respect to superannuation or possibly if parties to the agreement were not advised, at the time of signing of the agreement, of the effects of the new legislation and the possibility of applying to the Court pursuant to the FLA, given the original referral was made in 2006.
This concern was shared by the Family Law Practitioners Association of WA, which submitted that, according to its reading of the bill:
…there is no provision which prevents an application for orders pursuant to the new proposed section 90YX where parties already have final orders for property settlement pursuant to Part 5A of the Family Court Act 1997 (WA).
In order to remove any ‘doubt about the finality’ of existing final property orders, the Law Council recommended that the new power to split the superannuation of de facto couples should not apply in cases where parties ‘have already made a financial agreement pursuant to Division 3 of Part 5A of the FCA and that agreement is determined as binding and is not set aside’. The Family Law Practitioners Association of WA made a similar recommendation.
The department was not opposed to the idea of an express provision, saying:
While other provisions in the Bill would make applications from those with final orders unlikely, including an additional express transitional provision that operates as an automatic bar would assist in reducing any uncertainty with respect to the situation of de facto parties with final orders in place on commencement.
The Australian Institute of Family Law Arbitrators and Mediators suggested that the bill should incorporate amendments to Section 10L and Section 13E of the Family Law Act 1975 (Cth), which deal with arbitration. The Institute recommended amendments be made to ‘specifically refer to the incorporation of Part VIIIC consistent with the reference to the other parts in those sections’.
The committee has carefully considered the views of stakeholders in relation to the transitional provisions in the bill, particularly the opt-in mechanism for parties with applications already on foot, and those lodged prior to commencement.
An automatic application approach may lead to some delays and potentially increase some costs in cases that are already before the courts. However, the current opt-in approach is likely to mean that a significant number of individuals miss out on the opportunity to benefit from superannuation splitting.
Individuals separating from de facto relationships in Western Australia have been unable to benefit from superannuation splitting for ten years longer than those in any other state or territory of Australia. The bill is designed to rectify this situation, and make the property settlement regime applying to separating de facto couples in Western Australia fairer, especially for women.
Affected individuals should not continue to miss out on these benefits while waiting for the provisions to fully commence. As such, the committee considers that an amendment to the bill is warranted, along the lines of that recommended by the Family Law Section of the Law Council of Australia.
The committee also acknowledges concerns expressed in relation to possible ambiguity around the application of the provisions to existing final property orders. An express provision should be added to the bill to remove any ambiguity.
The committee recommends that the bill be amended so that it is not the date upon which an application is filed which determines if superannuation of de facto couples can be split, but instead the date upon which the relevant final order is made.
The committee recommends that the bill be amended to expressly provide that the provisions do not apply to separating de facto couples who have already made a binding financial agreement pursuant to Division 3 of Part 5A of the Family Court Act 1997 (WA), and where that agreement has not otherwise been set aside.
The committee recommends that, subject to the preceding recommendations, the Senate pass the bill.