House of Representatives

Explanatory Memorandum

Circulated By Authority of the Attorney-General, the Honourable Robert Mcclelland MP

SCHEDULE 2 - CONSEQUENTIAL AMENDMENTS RELATING TO DE FACTO FINANCIAL MATTERS

A New Tax System (Family Assistance) Act 1999

Item 1: Subparagraph 19(2)(c)(iii)

245. This item inserts the words ', a financial agreement (within the meaning of the Family Law Act 1975 ), a Part VIIIAB financial agreement (within the meaning of that Act)' in subparagraph 19(2)(c)(iii) of the A New Tax System (Family Assistance) Act 1999 . This amendment ensures that a consistent approach to the treatment of sources of maintenance is made to all financial agreements made under the Family Law Act for the purpose of the A New Tax System (Family Assistance) Act.

Item 2: Subparagraph 20A(10)(b)(iii) of Schedule 1

246. This item inserts the words ', or Part VIIIAB financial agreement,' in subparagraph 20A(10)(b)(iii) of Schedule 1 to the A New Tax System (Family Assistance) Act 1999 . This will ensure that financial agreements between parties to a de facto relationship made under new Part VIIIAB are included in the definition of a 'maintenance liability' for the purposes of determining the annualised amount of maintenance income of a person under that Act.

Item 3: Subparagraph 24(3)(a)(iii) of Schedule 1

247. This item inserts the words ', or Part VIIIAB financial agreement,' in subparagraph 24(3)(a)(iii) of Schedule 1 to the A New Tax System (Family Assistance) Act 1999 to include a reference, in section 24 of that Act, to financial agreements between parties to a de facto relationship made under new Part VIIIAB. Section 24 of the A New Tax System (Family Assistance) Act apportions, for the purposes of that Act, capitalised maintenance income, received by a person, over the period for which it was received.

Bankruptcy Act 1966

Item 4: Subsection 5(1) (definition of maintenance agreement )

248. This item inserts the words ', or Part VIIIAB financial agreement,' into the definition of 'maintenance agreement' in subsection 5(1) of the Bankruptcy Act 1966 . This amendment extends the definition of maintenance agreement to make it clear that financial agreements between parties to a de facto relationship made under Part VIIIAB of the Family Law Act 1975 are not maintenance agreements under the Bankruptcy Act.

Item 5, 6 and 7: After Subsection 35(1), subsection 35(2), and at the end of section 35

249. These items insert new subsection 35(1A) in the Bankruptcy Act 1966 . Where:

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a party to a de facto relationship is bankrupt, and

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the trustee of the bankrupt's estate is a party either to property settlement proceedings under the Family Law Act 1975 in relation to the relationship or to proceedings for the maintenance of the other party to the relationship, or has applied to set aside or vary a property settlement order under that Act

new subsection 35(1A) will confer jurisdiction on the Family Court of Australia in any matter connected with or arising out of the bankruptcy of the bankrupt party to the de facto relationship.

250. Item 5 mirrors the existing provisions in subsection 35(1) of the Bankruptcy Act 1966 providing the Family Court of Australia with concurrent bankruptcy and family law jurisdiction where a party to a marriage is bankrupt.

Items 8 and 9: Subsection 35B(1), after subsection 35B(1)

251. Section 35B of the Bankruptcy Act 1966 confers the concurrent bankruptcy and family law jurisdiction that the Family Court of Australia has on the Family Court of Western Australia. The effect of these items is to limit that conferral on the Family Court of Western Australia to concurrent bankruptcy and family law jurisdiction where a party to a marriage is bankrupt. Western Australia has not referred powers on financial matters relating to parties to a de facto relationship in the terms referred by the several other States.

Item 10: Paragraph 40(1)(o)

252. This item amends paragraph 40(1)(o) of the Bankruptcy Act 1966 to provide that a debtor commits an act of bankruptcy when he or she becomes insolvent as a result of one or more transfers of property in accordance with a Part VIIIAB financial agreement (within the meaning of the Family Law Act 1975 ).

Item 11: Section 59A

253. This item inserts a reference to new Part VIIIAB of the Family Law Act 1975 into section 59A of the Bankruptcy Act 1966 which provides that sections 58 and 59 of that Act, which deal with the vesting of property upon bankruptcy, or upon a second or subsequent bankruptcy, have effect subject to an order under Part VIII of the Family Law Act. The effect of this item is to provide that sections 58 and 59 of the Bankruptcy Act also have effect subject to an order under new Part VIIIAB of the Family Law Act.

Item 12: Paragraph 116(2)(q)

254. This item amends paragraph 116(2)(q) of the Bankruptcy Act 1966 to clarify that property that a trustee of a bankrupt estate is required to transfer under an order under Part VIII of the Family Law Act 1975 to a former spouse of the bankrupt after the dissolution of their marriage is not property that is divisible amongst the creditors of the bankrupt.

Item 13: At the end of subsection 116(2)

255. This item inserts new paragraph 116(2)(r) to provide that, any property that, under an order under Part VIIIAB of the Family Law Act 1975 , a trustee of a bankrupt estate is required to transfer to a former de facto spouse of the bankrupt, is not property that can be divisible amongst creditors of the bankrupt. This section replicates existing provisions for parties to a de facto relationship.

Item 14: Paragraph 120(5)(e)

256. This item amends paragraph 120(5)(e) of the Bankruptcy Act 1966 to clarify that a grant of a right of residence, by a person who later becomes bankrupt, to his or her former spouse following the dissolution of their marriage, in property transferred to that former spouse has no value as consideration, for the purposes of determining whether it is void against the trustee of the bankrupt's estate as an undervalued transaction, unless the transfer relates to a property settlement or agreement under the Family Law Act 1975 .

Item 15: At the end of subsection 120(5)

257. This item replicates, for parties to a de facto relationship, existing paragraph 120(5)(e) of the Bankruptcy Act 1966 . The effect of paragraph 120(5)(e) is explained in the immediately preceding paragraph.

Item 16: Paragraph 121(6)(e)

258. This item amends paragraph 121(6)(e) of the Bankruptcy Act 1966 to clarify that a grant of a right of residence, by a person who later becomes bankrupt, to his or her former spouse following the dissolution of their marriage, in property transferred to that former spouse has no value as consideration, for the purposes of determining whether it is void against the trustee of the bankrupt's estate as one to defeat creditors, unless the transfer relates to a property settlement or agreement under the Family Law Act 1975 .

Item 17: At the end of subsection 121(6)

259. This item replicates, for parties to a de facto relationship, existing paragraph 121(6)(e) of the Bankruptcy Act 196 . The effect of paragraph 121(6)(e) is explained in the immediately preceding paragraph.

Item 18: Subsection 140(11)

260. This item amends subsection 140(11) of the Bankruptcy Act 1966 to provide that the provisions of section 140 of that Act, relating to declaration and distribution of dividends of the estate of a bankrupt amongst the bankrupt's creditors, have effect subject to an order under new section 90SS made in proceedings under new Part VIIIAB between parties to a de facto relationship.

261. Those provisions currently have effect subject to an order under section 114 of the Family Law Act 1975 which deals with interlocutory injunctions.

Child Support (Assessment) Act 1989

Item 19: At the end of subsection 84(5)

262. This item inserts the words 'a Part VIIIAB financial agreement (within the meaning of that Act)' in subsection 84(5) of the Child Support (Assessment) Act 1989 so that it is clear that a child support agreement under that Act and a financial agreement between parties to a de facto relationship made under Part VIIIAB of the Family Law Act 1975 can be included in the one document.

Items 20 and 21: Paragraph 152(1)(b), and subsection 152(1)

263. These items extend the operation of section 152 of the Child Support (Assessment) Act 1989 to include financial agreements between parties to a de facto relationship made under Part VIIIAB of the Family Law Act 1975 . Section 152 of the Child Support (Assessment) Act ceases the effect of a court order, maintenance agreement or financial agreement under which child support is payable, at the time child support becomes payable under an administrative assessment under that Act.

Child Support (Registration and Collection) Act 1988

Item 22: Subsection 4(1) (at the end of subparagraph (a)(i) of the definition of collection agency maintenance liability )

264. This item inserts the word 'or', for consistency with modern drafting style, at the end of subparagraph (a)(i) of the definition of 'collection agency maintenance liability' in subsection 4(1) of the Child Support (Registration and Collection) Act 1988 .

Item 23: Subsection 4(1) (after subparagraph (a)(iii) of the definition of collection agency maintenance liability )

265. This item inserts new subparagraph (a)(iv) in the definition of 'collection agency maintenance liability' in subsection 4(1) of the Child Support (Registration and Collection) Act 1988 to include within that definition a liability of a party to a de facto relationship to pay a periodic amount for the maintenance of the other party to the relationship.

Item 24 and 25: Subsection 4(1) (definition of maintenance agreement )

266. These items extend the definition of a 'maintenance agreement' contained in subsection 4(1) of the Child Support (Registration and Collection) Act 1988 to include agreements in writing that make provision in relation to the maintenance of a party to a de facto relationship, including a financial agreement between parties to a de facto relationship made under Part VIIIAB of the Family Law Act 1975 .

Item 26: Subsection 4(1)

267. This item inserts a definition of 'party to a de facto relationship' in subsection 4(1) of the Child Support (Registration and Collection) Act 1988 having the same meaning as in the Family Law Act 1975 .

Item 27 : Subsection 4(1 ) ( after paragraph (d) of the definition of terminating event )

268. This item inserts new paragraph (daa) in the definition of 'terminating event' in subsection 4(1) of the Child Support (Registration and Collection) Act 1988 to provide that where an enforceable maintenance liability under that Act relates to the maintenance of a party to a de facto relationship, the subsequent marriage of the person is a terminating event unless otherwise specified in the relevant court order, maintenance agreement or by force of law. New paragraph (da) replicates, for parties to a de facto relationship, existing paragraph (d) of the definition .

Items 28 and 29 : Section 18, at the end of section 18

269. These items replicate, for parties to a de facto relationship, existing section 18 of the Child Support (Registration and Collection) Act 1988 which provides when a liability is a registrable maintenance liability.

Item 30: At the end of subparagraph 112 (1)(b)(ii)

270. This item adds the word 'or' at the end of subparagraph 112(1)(b)(ii), to connect this subparagraph with new subparagraph 112(1)(b)(iii) inserted in the next item.

Item 31: After subparagraph 112(1)(b)(ii)

271. This item extends the operation of section 112 of the Child Support (Registration and Collection) Act 1988 to parties to a de facto relationship by inserting new subparagraph 112(1)(b)(iii) that replicates, for those parties, existing subparagraph 112(1)(b)(ii). Section 112 requires that where, under the Family Law Act 1975 or the law of a State or Territory, an order is made by, or registered in a court, or a maintenance agreement is registered in or approved by a court and the order or agreement makes provision for:

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the maintenance of a child; or

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the maintenance by a party to a marriage of the other party to a marriage; or

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the maintenance by a party to a de facto relationship of the other party to the relationship

the registrar or other responsible officer of the court send a sealed copy of the order or agreement to the Child Support Registrar within 28 days.

Federal Magistrates Act 1999

Item 32: Subparagraph 102(2)(l)(i)

272. This item amends subparagraph 102(2)(l)(i) of the Federal Magistrates Act 1999 to enable a Registrar of the Federal Magistrates Court to exercise the power of the Court to make an urgent de facto spouse maintenance order under proposed new section 90SG. Section 102 of the Federal Magistrates Act provides for a range of powers of the Federal Magistrates Court to be exercised by a Registrar of the Court, including the power under section 77 of the Family Law Act 1975 to make an urgent spouse maintenance order.

First Home Saver Accounts Act 2008

Item 33: Section 18 (at the end of the definition of family law obligation )

273. This item will amend the definition of 'family law obligation' in section 18 of the First Home Saver Accounts Act 2008 (the FHSA Act). A first home saver account will be able to be split by an order made under section 79 or section 90SM or in accordance with a financial agreement made between parties to a marriage under Part VIIIA of that Act. Generally, a first home saver account can only be split to a first home saver account or a superannuation account held by a person to whom the account holder is or has been married, or with whom the account holder has been in a de facto relationship.

274. The effect of the amendment made by this item to the definition of 'family law obligation' in FHSA Act section 18 is to provide that a first home saver account will be able to split in accordance with a financial agreement made between parties to a de facto relationship under Part VIIIAB of the Family Law Act.

Income Tax Assessment Act 1997

Items 34 to 37: After paragraph 126-5(1)(d), subsection 126-5(3A), after paragraph 126-15(1)(d), and subsection 126-15(5)

275. These items insert new paragraphs 126-5(1)(da) and 126-15(1)(da) in the Income Tax Assessment Act 1997 (ITAA 1997), and amend ITAA 1997 subsections 126-5(3A) and 126-15(5). The amendments extend the capital gains tax (CGT) marriage breakdown roll-over provided under ITAA 1997 Subdivision 126-A, now applying for transfers of assets under a binding written agreement made between parties to a de facto relationship under certain State or Territory laws, to transfer of assets under:

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an agreement made between such parties under Part VIIIAB of the Family Law Act 1975 that is binding under section 90UJ of that Act, and

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a corresponding written agreement that is binding under corresponding foreign laws.

Items 38 to 41: Paragraph 126-140(2A)(h), paragraph 126-140(2B)(b), paragraph 126-140(2B)(c), and after paragraph 126-140(2B)(d)

276. These items insert new paragraphs 126-140(2B)(da) in the Income Tax Assessment Act 1997 (ITAA 1997), and amend ITAA 1997 paragraphs 126-140(2B)(b) and (c). The amendments extend the capital gains tax (CGT) marriage breakdown roll-over provided under ITAA 1997 Subdivision 126-D. ITAA 1997 Subdivision 126-D roll-over now applies for the transfer of an asset reflecting the personal interest of a party to a de facto relationship in a small superannuation fund from that fund to another complying superannuation fund in accordance with a court order or a binding written agreement under certain State or Territory laws. The amendments will extend that roll-over to the transfer of an asset of that character between those funds in accordance with:

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a court order made under section 90SM of the Family Law Act 1975 (or under subsection 90AE(2) or AF(2) of that Act as modified by section 90TA of that Act), and

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an agreement made between the parties to the de facto relationship under Part VIIIAB of the Family Law Act that is binding because of section 90UJ of that Act.

Proceeds of Crime Act 2002

Items 42 and 43: After subparagraph 330(4)(ba)(i) and subparagraph 330(4)(ba)(ii)

277. These items insert new subparagraph 330(4)(ba)(ia) and insert the words ', or Part VIIIAB financial agreement,' in subparagraph 330(4)(ba)(ii) of the Proceeds of Crime Act 2002 to exclude property distributed in accordance with:

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an order under the Family Law Act 1975 with respect to the property of the parties to a de facto relationship, or

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a financial agreement between parties to a de facto relationship made under Part VIIIAB of that Act

from being proceeds of or instruments of an offence, and subject to forfeiture under the Proceeds of Crime Act, when six years has elapsed since that distribution.

Social Security Act 1991

Items 44 to 47: Subparagraphs 9A(2)(h)(iva), 9B(2)(h)(iva), 9BA(2)(f)(vi), and paragraph 9C(b)

278. These items omit the word 'spouse' and insert the word 'partner' in subparagraphs 9A(2)(h)(iva), 9B(2)(h)(iva), 9BA(2)(f)(vi), and paragraph 9C(b) of the Social Security Act 1991 .

Veterans' Entitlements Act 1986

Items 48 to 51: Subparagraph 5JA(2)(h)(iva), 5JB(2)(h)(iva), 5JBA(2)(f)(vi), and paragraph 5JC(b)

279. These items omit the word 'spouse' and insert the word 'partner' in subparagraphs 5JA(2)(h)(iva), 5JB(2)(h)(iva) and 5JBA(2)(f)(vi) of the Veterans' Entitlements Act 1986 .

Item 52: Subparagraph 51(3)(a)(ia)

280. This item inserts the words ', or Part VIIIAB financial agreements within the meaning of' in subparagraph 51(3)(a)(ia) of the Veterans' Entitlements Act 1986 to include a reference to financial agreements made between parties to a de facto relationship under Part VIIIAB of the Family Law Act 1975 in section 51 of the Veterans' Entitlements Act. Section 51 of the Veterans' Entitlements Act apportions, for the purposes of that Act, capitalised maintenance income received by a person over the period of time it was received.