The Law Handbook 2024

Chapter 5.6: Superannuation 415 creditors cannot take the superannuation savings. The bankrupt retains the benefit of monies in a regulated (and certainother types of) superannuation fund subject to some exceptions. However, a payment to a superannuation fund may be caught by the relation back or avoidance provisions of the Bankruptcy Act 1966 (Cth), even though that payment gives rise to the interest in the fund, which is protected (see Official Trustee in Bankruptcy v Trevor Newton Small Superannuation Fund Pty Ltd [2001] FCA 1267). Superannuation benefit disputes Death benefit disputes Disputes about death benefits are common. In addition to the benefits which have accumulated in the fund at the date of death, many funds provide substantial life insurance benefits, which are added to the accumulated benefit. However, the death benefit is usually not paid according to the will of the deceased but is paid according to the discretion of the trustee of the fund in accordance with the trust deed. The trust deed usually sets out a description of the class of people to whom the benefit can be paid; typically, the immediate family of the deceased or those wholly or partially dependent on the deceased. A member can nominate the recipient of a death benefit in such a way as to make the nomination binding and avoid having the trustee make a decision and possibly begin a dispute. It must be renewed every three years to remain binding, unless the fund is self-managed. Disputes can arise between possible beneficiaries about whether, for example, a particular person is wholly or partially dependent on the deceased; or, if more than one person satisfies the description of the class of beneficiaries, whether the trustee should exercise its discretion to determine how the benefit should be divided between the claimants. These problems become acute when the deceased was involved in more than one family during life. Factors taken into account by trustees include: • whether the deceased nominated a preferred ben- eficiary and, if so, whether any event has occurred since the nomination which might have invali- dated the nomination; • the comparative financial need of the claimants; • any amount to which a claimant is entitled from the estate of the deceased; • the extent of the financial dependency of the competing claimants on the deceased; and • the closeness of the relationship between the competing claimants and the deceased. A potential beneficiary who is dissatisfied with a decision made by a trustee can complain to the Australian Financial Complaints Authority (see ‘Review by the Australian Financial Complaints Authority’, below). Superannuation and family law A person’s superannuation entitlements can be divided between married and de facto couples. The division can be voluntary or ordered by the court. Regulations set out the methods of valuing superannuation interests. Whether a benefit is a defined benefit or an accumulation benefit makes a difference to the valuation method. The regulations also set out the way in which the payment split is to be put into effect and also the information that the trustees have to provide to the parties. The valuation and splitting of a benefit can be postponed. This can be useful if a defined benefit or a partially vested accumulation interest is involved. A superannuation benefit may be subject to a ‘caveat’ to prevent it being paid out until the non- entitled partner’s interest is determined and paid. The starting point for splitting superannuation is an equal division of benefits accumulated during the relationship, but certain factors (e.g. responsibilities for children under 18 and preserving farms) may be taken into account. A new interest can be created for the non-member partner in funds regulated by Commonwealth superannuation laws, or the amount can be rolled over into a new fund. The amount will be preserved as if it had not been divided. Couples can make binding superannuation agreements about how the superannuation will be divided if their relationship fails. Further useful information about super- annuation and family law is available on the website of the Federal Circuit and Family Court of Australia (www.fcfcoa.gov.au) .