The superannuation legislation outlining the new rules governing the retirement savings framework in Australia has already been shown to contain a number of faults, a specialist lawyer has observed.
“You’ve got to be very careful because we are finding a lot of holes in this legislation. We’re finding a lot of errors,” DBA Lawyers director Daniel Butler said during a webinar hosted by his firm last week.
“It was rushed through so hastily we didn’t really get any opportunity to really consult seriously and we’re finding a lot of holes.”
To illustrate his point, Butler used the treatment of an individual’s transfer balance cap (TBC) in the event of a divorce.
“Let’s say you started your TBC at $1.6 million, then do a split with your former spouse and off goes half of that, let’s say you’ve kissed goodbye to $800,000 under an interest split, there is no debit [reduction] to your TBA (transfer balance account),” he said.
He noted the legislation only allowed for a reduction to a person’s TBA if the individual’s pension cap was split and the non-member, or former spouse, also got paid a proportion of the remaining fund member spouse’s pension.
“Now that rarely happens. The only funds that happens in these days is typically public sector schemes or defined benefit funds because in normal accumulation funds you just say we’ll do an interest split and we’ll transfer that $800,000 over to the former spouse and that’s the end of it,” he said.
“Then we’re left with an $800,000 balance going forward to pay a pension.”
He further emphasised his point by highlighting the provision where a debit or reduction to a person’s TBC was allowed if their pension capital had fallen as a result of a fraudulent or dishonest act.
“If you’ve been ripped off through fraud or dishonesty, like a Trio or Storm situation, [the fraudulent party] has to be convicted before a debit is allowed,” he said.
“Now how many of these people are convicted and how long will it be until they’re ever tracked down?
“So the government hasn’t been overly generous there either.”
