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SuperValuers Newsletter - April 2005
Splittable Payments - Invalidity Pensions
Practitioners should be aware of the difference between invalidity payments made to Commonwealth Scheme members and military members (DFRDB and Military Super) for family law purposes.
In short, Commonwealth scheme members (PSS and CSS) who have an entitlement to an invalidity pension have a splittable payment. This is not the case for the military until the member has been in receipt of the invalidity pension for a period of 2 years.
What Payments are not Splittable?
Family Law (Superannuation) Regulations 2001 Reg 12(1) defines the following types of payments as being not splittable:
a. compassionate payments made under the Superannuation Industry (Supervision) Regulations (SIS)
b. payments made because of severe financial hardship (SIS defined)
c. pension payments made because of ill health but excludes:
i. payments made for permanent incapacity under subregulation 6.01(2) of SIS
ii. periodic payments exceeding 2 years, and
iii. if lump sum, at least 2 years since first payment
d. income protection or pre assessment invalidity payments made under various statutes
e. an anti avoidance mechanism to notionally reinstate small payments made within the Small Superannuation Account Act 1995.
Reg 12(1) c i of the Family Law (Superannuation) Regulations 2001 refers to Section 6.01(2) of SIS. The relevant SIS definition is as follows:
Prescribed incapacity in relation to a member who has ceased to be gainfully employed, means ill-health (whether physical or mental), where the trustee is reasonably satisfied that the member is unlikely, because of the ill health, ever again to engage in gainful employment for which the member is reasonably qualified by education, training or experience.
The above definition means that neither Class A nor Class B military invalidity pensioners meet the SIS definition of prescribed incapacity. This definition is for total and permanently incapacity. (tpi). A Class A starts at 60% incapacity.
Rationale
Except for the anti avoidance mechanism, the above payments have one characteristic in common - they all are of a non recurring type or might be expected to be non recurring. After being in receipt of a invalidity pension for 2 years, it is reasonable that the pension could be recurring and therefore, the Family Law (Superannuation) Regulations 2001 defines such payments as splittable if they had been paid for a 2 year period.
Fireman, policeman and other emergency service type personnel might have invalidity payments with similar characteristics to the military so care is required if the payment has not been made for at least two years.
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