Decision of the Superannuation Complaints Tribunal
28 The Tribunal noted at [20] of its reasons for decision that, under s 37(6) of the SRC Act, its role was to initially determine whether the Trustee's decision to comply with Child Support Agency notices was "fair and reasonable in its operation in relation to the Complainant in the circumstances". The Tribunal observed:
21. The issue is not what decision the Tribunal would have made on the evidence before the Trustee but whether the decision was fair and reasonable.
…
24. Albeit, the Tribunal cannot help but comment, that far from the Trustee 'intervening', it has merely complied with what it understands to be legally binding notices issued to it by the CSA.
25. Therefore, the sole issue now confronting this Tribunal is the fairness and reasonableness of the Trustee's decision to give effect to the CSA's Notices.
29 The Tribunal noted that the central issue before it was the payment of monies, sourced from Mr Carmody's pension 2, to the Child Support Agency.
30 The Tribunal then examined Mr Carmody's assertion that the Trustee's compliance with the relevant notices issued in relation to pension 2 breached reg 13.16 of the SIS Regulations:
27. Turning now to the first of the Complainant's substantive arguments against complying with either the CSA's s45 or s72A notices, the Tribunal must initially consider the correct interpretation of reg13.16 of the SIS Regulations. This relevantly states:
…it is a standard applicable to the operation of regulated superannuation funds that, subject to subregulation (2), a beneficiary's right or claim to accrued benefits, and the amount of those accrued benefits, must not be altered adversely to the beneficiary by amendment of the governing rules, or by any other act carried out, or consented to, by the trustee of the fund.
28. The nub of the Complainant's contention in this regard is:
The Applicant submits that the [Trustee] has undertaken and consented to an action that has altered Mr [Son's] Invalidity [sic] benefit and the amount of which has been altered in credit to a third party being the CSA.
29. The Trustee has countered at follows:
4. As detailed in our earlier submissions, [Trustee] has not altered the amount of Mr [Son's] Invalidity Pension nor has it made an impermissible reduction to Mr [Son's] Invalidity Benefits. [Trustee] has directed payment of a portion of the Invalidity Pension specified in a Deduction Notice as 'the amount to deduct' to the Child Support Agency, in compliance with a Deduction Notice.
31 The Tribunal continued:
30. The Tribunal has carefully considered these contrary responses and considers the Trustee is correct; 'the amount of those accrued benefits' has not been 'altered adversely' by the Trustee, but rather each fortnight a specified amount of money has been applied on the Son's behalf in satisfaction of a legal obligation he has, not only incurred, but acknowledges he has incurred. Further, when that obligation has been discharged, the 'amount of those accrued benefits' - that being the entitlement to the invalidity pension, remains unaffected.
31. It is no doubt for this reason that reg13.16 contains the following 'carve out', namely, where:
(f) the alteration is made:
(i) to give effect to a payment split;…
because in the case of a Family Law mandated 'payment split', the fund member's 'amount of [those] accrued benefits' has been permanently 'altered adversely' by virtue of the payment split, in favour of the fund member's former spouse; in contradistinction no such legislative carve out was considered necessary for payments made pursuant to a CSA notice, as compliance did not permanently alter a Fund member's 'amount of [those] accrued benefits'.
32. The Tribunal accordingly determines the Trustee's compliance with the CSA's payment notices did not offend reg13.16.
32 The Tribunal considered whether the Trustee was required to comply with the s 45 notice insofar as s 45 referred to an employer/employee relationship between the Trustee and the applicant. The Tribunal noted the Trustee's submission that the terms "employer" and "employee" were very broad under the CSRCA, and that for the purpose of s 45 the Trustee was the applicant's "employer" as it made "work and income support related payments" to him. The Tribunal turned to the definition of work and income support related payments in s 4 of the CSRCA which provides:
"work and income support related withholding payments" means:
(a) payments from which an amount must be withheld under a provision of Subdivision 12-B (other than section 12- 55), 12-C or 12-D or Division 13 in Schedule 1 to the Taxation Administration Act 1953 (even if the amount is not withheld); or
(b) payments from which an amount would be required to be withheld under a provision mentioned in paragraph (a) (other than section 12- 55) apart from subsection 12-1(1A) in Schedule 1 to that Act.
Note: The payments covered are: payments to employees and company directors, payments to office holders, return to work payments, payments under labour hire arrangements, payments of annuities, payments of superannuation benefits, payments for termination of employment, payments for unused leave, benefit payments, compensation payments, payments specified by regulations and alienated personal services payments.
33 The Tribunal noted at [36]:
The Tribunal is conscious the legislation underpinning the operation of the [CSRCA] is beneficial, in that it is designed to spread the income catchment net as widely as possible, in order to achieve the maximum level of adherence by separated parents, for the continuing financial support of their biological offspring.
34 The Tribunal concluded:
38. Accordingly, the Tribunal, conscious of the legislative intent underlying the [CSRCA], coupled with the breadth of coverage mandated by the 'Note' to the [CSRCA's] definition of 'work and income support related withholding payments', accepts it was not unfair or unreasonable for the Trustee to conclude its pension 2 payments to the Son were encompassed by a s45 notice.
39. The Tribunal's determination in this regard is also bolstered by the fact the 'Note' specifically refers to 'payments of superannuation benefits' and Logan J's finding in Campbell v Superannuation Complaints Tribunal [2016] FCA 808, wherein he described Mr Campbell's receipt of an invalidity pension benefit as:
… having regard to the definition of "superannuation interest", and to the terms of the Deed, the interest which the Deed has conferred on him to receive, subject to the terms of that Deed (which include the possibility of re-classification), namely his invalidity pension benefit, is a "superannuation interest" as defined.
allied with the fact the Tribunal accepts the Trustee's contention that:
• A possible future reclassification of a[n] [Fund] Invalidity [sic] classification to a Class C benefit does not establish a residual capital value. A residual capital value is the payment of a lump sum of the remaining capitalised value of a pension. Whereas when a[n] [Fund] Invalidity [div] pensioner is reclassified to Class C, the resulting preserved benefit restores the member's previous preserved employer benefit in the fund, without any reference to how much pension has been paid to the member.
11. [Trustee's] position is that a[n] [Fund] Invalidity pension is a "superannuation income stream" under section 307-70 of the Income Tax Assessment Act 1997. In turn, regulation 12-80 of Schedule 1 of the Taxation Administration Act 1953 imposes a corresponding obligation on [Trustee] to withhold an amount from the superannuation income stream.
12. Accordingly Mr [Son's] [Fund] Invalidity Pension is a "pension" under the SIS Regulations, as it is a "superannuation income stream" for tax purposes; and it comes within the definition of "work and income support related withholding payments" (and, in turn, "salary or wages") in section 4 of the [CSRCA].
(Formatting in original.)
35 The Tribunal considered Mr Carmody's submission that the Trustee did not meet the definition of an "employer" under s 4 of the CSRCA because pension 2 was paid by the Commonwealth, and not the Trustee. The Tribunal rejected this submission. Rather, the Tribunal accepted the contention of the Trustee that the Trustee bore the liability of making the fortnightly pension 2 payments and that, "if payment of Mr [Son's] pension was to stop, any legal action on behalf of Mr [Son] for reinstatement of his pension would be made against the [Trustee], not the Commonwealth."
36 The applicant also submitted that the Trustee was not a "person" and therefore should not have complied with the s 72A notice. Relevantly, s 72A states:
72A Registrar may collect debts from a third person
(1) The Registrar may give written notice to a person:
(a) by whom money is due or accruing, or may become due, to a relevant debtor; or
(b) who holds, or may subsequently hold, money for or on account of a relevant debtor; or
37 The Tribunal observed that the definition of person in s 72A of the CSRCA included "a partnership and any Commonwealth, State or Territory public authority (whether incorporated or unincorporated)". The Tribunal noted that the Trustee was a "body corporate, continued in existence…by an act (Act 2) of Federal Parliament", and hence that it was fair and reasonable for it to comply with the s 72A notice.
38 The Tribunal also considered the applicant's submission that the Trustee breached reg 13.13 of the SIS Regulations by complying with the Child Support Agency's notices. The Tribunal said:
45. Similarly, the Complainant's argument that compliance with a s45 or s72A [CSRCA] notice offends reg13.13 of the SIS Regulations prohibiting a 'charge' over the Son's benefit; the Tribunal accepts and adopts the Trustee's counter argument that reg13.11 defines a charge 'to include a mortgage, lien or other encumbrance', which are forms of security over property; relevantly the Trustee noted in this respect:
53. Child Support deductions are not appropriately categorised as a "security over property". The deductions would not continue to be made if Mr [Son's] benefit ceased and would not crystallise in any way such that the Child Support Agency became the owner of the benefit, as is the case with a mortgage lien or other encumbrance.
46. The Tribunal therefore does not agree with the Complainant's contention that reg13.13 of the SIS Regulations is breached by virtue of the Trustee complying with either a s45 or s72A [CSRCA] notice.
39 Finally, the Tribunal considered Mr Carmody's argument that the Trustee garnisheed more than the protected earnings amount, and that the inclusion of amounts referable to pension 1 made the deduction void. The Tribunal rejected the applicant's argument, and concluded that this matter concerned an issue that should be raised with the Child Support Agency.
40 In light of these findings, the Tribunal at [49] accepted the Trustee's position that, "in complying with the… [CSRCA], as it is legally required to do, [Trustee] has been fair and reasonable". Accordingly, the Tribunal affirmed the Trustee's decision under s 37(6) of the SRC Act.