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(August-2002) A de facto dilemma
When a married couple divorces, what happens to the superannuation entitlements of either party is now regulated by the Family Law Act, which is a law of the Commonwealth — or at least, it will be when the amendments made in 2001 come into effect later this year.
What about de facto relationships? When a de facto relationship comes to an end, the parties do not, of course, have to seek any formal decree of dissolution. But if the relationship is longstanding, there may well be property in common, and dependence by one party on the other for financial support. And, if one party has superannuation interests, the other may wish to assert some degree of entitlement to these.
This is dealt with under state laws, which can be a recipe for confusion. In this area, however, there has been some attempt at uniform treatment. Finding the relevant law, however, is not always an easy or intuitive process. For example, in Victoria and Queensland it is found in the Property Law Act of each state, in New South Wales it is in the Property (Relationships) Act, while in South Australia you have to look in the De Facto Relationships Act.
In essence, state law gives the courts the power to make orders adjusting superannuation entitlements of parties to a de facto relationship when the relationship ends and the parties are sorting out their respective property interests. Alternatively, the courts may adjust the parties’ property interests in relation to their financial resources. The various state laws describe ‘property’ or ‘financial resources’ as including a prospective claim or entitlement in respect of superannuation, retirement or similar benefits.
The break up of a de facto relationship can be just as traumatic as that of a marriage. This is vividly illustrated in a recent South Australian case, in which the parties had simultaneous proceedings on foot in the Family Court about support and care of their children, and in the Adelaide Magistrate’s Court about division of the property, all of it described by the court as “quite acrimonious”.
In particular, the male party was seeking early release of a portion of his superannuation benefits because, he said, it was his only asset and he was otherwise destitute. He claimed that he had no other assets and that his outgoings exceeded his income by a significant amount, especially since he shared care of the children and was heavily involved in the various court cases. He had $20,000 in benefits in a public sector super scheme, but was now unemployed and receiving social security. He said he would be entitled to access half of his superannuation benefits because of his destitution.
His former spouse, however, resisted this application claiming that the court would eventually award the superannuation benefits to her, and if he had access to the money he would dissipate it, depriving her of her just entitlement. Furthermore, she said he was not, in fact, destitute. She gave evidence that suggested her former partner had not been completely frank with the court about his financial circumstances. He retorted that almost all of the income she spoke of was eaten up in expenses of earning that income. Unfortunately, he did not present any evidence that would prove his assertion.
The South Australian Supreme Court, on appeal, decided that South Australian de facto relationships law clearly enabled the court to order division of a party’s superannuation benefits or to award them to the non-member party. In this case, there was evidence that at least suggested the member was not as badly off as he claimed. The court therefore declined to give him access to his benefits, pending final resolution of the property split.
And, what of same-sex relationships? Some state laws — for example, those of New South Wales and Queensland — clearly contemplate the possibility that two persons of the same sex may form a de facto relationship, which means that same-sex couples in those states have the same rights in respect of property and financial resources as male-female couples. Other states, such as Victoria and South Australia, stick to the idea that the parties to a de facto relationship must be a man and a woman.
Whatever advances may have been made recently in relation to legal entitlements of same-sex partners, there is clearly some way to go for tax purposes.
A person who makes super contributions on behalf of his or her spouse is entitled to an income tax rebate. This extends to de facto spouses, according to the definition of ‘spouse’ in income tax law. But that definition refers to a person who “although not legally married to the [other] person, lives with the person on a genuine domestic basis as the person’s husband or wife”. The Australian Taxation Office has recently decided that this cannot include same-sex partners, even in a case where one partner is wholly dependent on the other. ‘Husband’ and ‘wife’ apparently still have their traditional meanings.
— Brian Egan is a freelance commentator on superannuation, tax and corporations law matters, and a principal of Sirius Information Services.
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