Redemption of superannuation during proceedings

Redemption of superannuation during proceedings

Jasper & Thorp

The effect of the redemption

152. The difficulty of course is that the husband no longer has $1,118,985.31 in his fund. He now has $804,067.00 and 30% of the reduced amount is $241,220.10. If the wife received $335,695.59 now she would effectively be receiving about 42% of the husband’s entitlement.
153. The redemption could be dealt with either by way of add back or by way of a s.75(2) adjustment.
154. In his written submissions dated 22 February 2016 the wife’s counsel said the law on add backs was settled and that the husband’s removal of $202,000.00 in June 2015 should be dealt with as a s. 75(2) matter. He submitted that there should be an adjustment of $100,000.00 in the wife’s favour for the premature redemption.
155. This would result the wife receiving 50% of the amount removed even though she is only entitled to 30% of the pension (and even on the wife’s case 40%) and that cannot be right.
156. The husband’s counsel also submitted that the law on add-backs was settled but then submitted that the parties entitlements to a share of the pension in dollar terms should be in accordance with the findings on dollar terms as if the husband had not removed any of the money.
157. In written submissions in reply the wife’s counsel indicated that the wife could live with that outcome although of course it was his case that the outcome in dollar terms should be as the wife proposed.
158. There are problems with the approach by both counsel.
159. The submission by both counsel that the law on add-backs is settled seems to imply that the tool of an addback could no longer be used in property matters and that is simply not correct. There are cases where using this tool is essential to ensure that one party is properly compensated for the premature distribution of the asset pool in their favour by the other party.
160. However this is not a matter which can be dealt with simply by adding back $202,000.00. As the wife’s counsel pointed out during submissions although the husband redeemed $202,652.89 the difference between the two valuations is $314,918.31. No evidence was provided to explain the reason for this.
161. The two valuations were prepared 16 months part and in the report attached to his 9 February 2015 affidavit Mr P observed that while the family law value would increase each year assuming a CPI increase of at least 2% it would also decrease each month as life expectancy was used up. He advised that the family law value would remain relatively stable over the short term. However he did not say what he meant by the short term and the evidence simply does not allow me to determine exactly why the value of the pension was $314,918.31 less the redemption. It would therefore be unjust to require the husband to bear all the additional loss.
162. I intend to deal with the matter in this way.
163. I am satisfied that the husband should be brought to account in dollar terms for the amount he removed. The tax of $23,000.00 was incurred because of his decision to redeem, he used $121,000.00 to pay his legal fees, I can deal with any payment he made to joint debts as a separate s. 75(2) matter and he provided no evidence which would justify him using some of the money for living costs and payment of bills. He had an adequate income after separation to meet his day to day living costs.
164. However it would be unjust for me to make the husband responsible for all of the additional loss of $112,000.00 and the way to bring the husband to account in these circumstances is to use the amount remaining in the fund in July 2015 as the yardstick but to adjust the percentages.
165. If the wife is deemed to be entitled to 37% of the July 2015 capitalised amount and the husband 63% it brings the husband to account for the $202,000.00 he removed. In dollar terms as the value of the fund stood in July 2015 this would entitle the wife to $297,504.79 and the husband to $506,562.21. It gives the wife more than she would have if she received 30% of the reduced amount but ensures that the loss of $112,000.00 does not fall solely on the husband.
166. The overall effect of a division of property on the basis of contributions in this scenario is that the wife would be entitled to:
     1. $40,900.00 being 50% of Pool 1(a)
     2. $500.00 being the whole of Pool 1(c)
     3. $109,600 being her (omitted) Superannuation
     4. $297,504.79 being her share of the husband’s s. 10 pension
167. The husband would be entitled to:
     1. $40,900.00 being 50% of Pool 1(a)
     2. $48,000.00 being the whole of Pool 1(b)
     3. $33,000.00 being his (omitted) superannuation
     4. $506,562.61 being his share of the s.10 pension.