By Mark Bland, Partner, Emma Higgs, Senior Associate, and Brittany Buchanan, Paralegal

On 19 January 2023 the Federal Government released a discussion paper for consultation, proposing legislation aimed at dissuading attempts by convicted offenders of child sexual abuse to hide their assets in superannuation to avoid paying compensation to their victims.  Consultation closes on 16 February 2023 and the government has said it is committed to enacting the relevant legislation without delay.

Overview

The discussion paper sets out two proposals designed to facilitate the release of an offender’s superannuation for the purpose of satisfying unpaid compensation orders to victims and survivors of child sexual abuse. The first measure would allow victims and survivors to be awarded an amount from their offender’s additional contributions, while the second measure would provide victims and survivors with visibility of the offender’s (and their spouse’s) superannuation contributions.

Proposal one: Accessing superannuation for unpaid compensation orders

The aim of the government’s proposed legislative change is to disincentivise child sexual abuse offenders from making additional contributions to superannuation to shield those financial assets in the event of a compensation order being made against them.  The proposal states that victims and survivors could apply to the court for an order requiring the release of monies from the offender’s or their spouse’s superannuation funds in order to pay the required compensation if the below criteria are met:

• a child sexual abuse victim has a compensation order awarded by a Commonwealth, state, or territory court relating to the offending conduct;
• the compensation order remains unpaid (or partly paid) for at least 12 months from the date of the award;
• the offender has received a criminal conviction or recognisance release order for the same conduct; and
• the offender has made “additional” contributions to their or their spouse’s superannuation fund, in the period leading up to their criminal conviction.

Upon receipt of the court order, the ATO would issue a release authority to the relevant superannuation fund, and the fund trustee would be compelled to pay the amount specified, directly to the victim.

This procedure would be available to the beneficiary of a compensation order awarded by a criminal court as part of sentencing or post-conviction proceeding, and also to compensation orders made in civil claims, but only where the offender has in fact received a criminal conviction or recognisance release order for the same conduct. In the government’s opinion, access to superannuation should only be available to victims where there is no reasonable doubt that the offender is guilty of the relevant (child sexual abuse) offence.

The government expects that the proposal will apply retrospectively, both in terms of the historical offences that are eligible and historical superannuation contributions, however it is not expected to operate to revive compensation orders that have already been extinguished, by bankruptcy or the passage of time, or to defeat any statutory limitations.

The superannuation contributions that a victim could access will be limited to “additional” contributions only, or any unclaimed superannuation moneys held by the ATO. A victim will not be able seek payment of their compensation order from an offender’s general superannuation balance.  Compulsory superannuation guarantee payments will remain protected.  The government proposes that the superannuation contributions that would be available to be paid to victims are only those “additional” contributions made by the offender (to their own or their spouse’s superannuation fund) during the “deeming period”.  That is a period starting shortly before (either 6 or 12 months) the day the offender was charged, up until the court orders the compensation for the victim.

This proposal is complemented by proposal number two in the discussion paper, which seeks to provide visibility as to whether an offender who has failed to pay a compensation order has, in fact, made additional contributions to their or their spouse’s superannuation fund that could be used to pay the outstanding compensation.

Proposal two: Providing visibility of superannuation accounts

The second proposal seeks to provide victims and survivors of child sexual abuse with a mechanism to obtain visibility of the superannuation contributions made by their offender in the lead up to their conviction. This is intended to enable the victim to assess whether it is worthwhile proceeding with the court application to have additional contributions released to satisfy an unpaid compensation order. The government proposes that victims and survivors would be given the option of submitting a superannuation information request form to the relevant court to ascertain the total value of additional contributions made by the offender during the deeming period. If the request is granted by the court, the court would then seek the relevant information from the ATO and, once a response is received by the court it would inform the relevant applicant.

This system is expected to operate similarly to the existing visibility of superannuation mechanisms used in family law proceedings and would be subject to the lag associated with statutory reporting requirements.  It would require creating a new exemption for the release of information under the Tax Administration Act 1953, as the information to be obtained constitutes ‘protected information’. Consultation questions are seeking feedback on the feasibility and appropriateness of creating such a system.

The discussion paper also invites views on policy design considerations such as changes to the bankruptcy laws to allow compensation orders to survive bankruptcy, interactions with family law proceedings, extension of the provisions to the superannuation accounts of other family members, the tax treatment of the released superannuation monies, and the exclusion of defined benefit schemes.

Background

Victim survivor advocate and 2021 Australian of the Year, Grace Tame, has been critical of the laws that prevent a victim survivor gaining access to an offender’s superannuation to compensate their victims, declaring that child sexual abusers have exploited the system, hiding their assets in superannuation to put them out of reach of their victims[1].

This latest consultation follows an earlier consultation initiated by a broader review into early release of superannuation on severe financial hardship and compassionate grounds conducted by the previous government in December 2017.

Following that review, a discussion paper issued in May 2018 invited views on measures to enable victims of serious crime access to their offender’s superannuation to satisfy unpaid compensation orders.  The proposals were ultimately abandoned by the then government, however in response to the “Super for Survivors” campaign[2], the minister for Financial Services, Stephen Jones MP, commenced the current consultation.

The current proposals

The current proposal is limited to a small subset of superannuation contributions, and thereby avoids the complexity of enabling a victim to access their offender’s entire superannuation account. The government says this is because it is closing a loophole that enables offenders to deliberately put financial assets out of reach of potential compensation claims, by shielding them in their superannuation fund.  This is narrower in scope than the changes sought by victim and survivor advocates, who also highlight the difficulties of securing criminal convictions and consider that an offender’s entire superannuation balance should be available to also satisfy orders made in civil claims, where the offender is found by a court to have committed the relevant acts, on the balance of probabilities. Whilst the previous discussion paper on the issue proposed making the entire superannuation balance available to victims of all serious crimes, it did not propose extending this to unpaid civil compensation claims in the absence of a criminal conviction, citing strong support for that position during consultations with stakeholders.

Although the Government is yet to open the imminent consultation on legislating a purpose of superannuation, there is a strong indication of what that is in this discussion paper, being to provide an income in retirement, and on that basis the scope of the proposed legislative change has been limited.

This discussion paper seeks stakeholder feedback on some sensitive issues raised by the proposed legislative changes. The government submits that the offences to which the proposals apply should be limited by the definition of ‘child sexual abuse offence’ outlined in section 3 of the Crimes Act and the offences in Division 270 and 271 of the Criminal Code in circumstances where the victim or survivor was a child and the exploitation or intended exploitation is sexual in nature. This raises the question as to whether access to superannuation should be available for victims of other serious crimes, such as slavery, slavery-like offences, trafficking in persons, child neglect, domestic violence, assault, or any other serious offence where significant trauma has been caused and a victim is awarded compensation. If implemented, the current proposals would create a mechanism for extension into these broader areas at a future date.

Issues for trustees

Various submissions to the 2018 consultation emphasised the important fiduciary considerations for superannuation fund trustees regarding how they would approach their duty to act in the best financial interests of their members in circumstances where a convicted child sexual abuse offender is a member of their fund and their victim is seeking to be compensated from monies held in their superannuation account. Under the current proposals trustees are relieved of any discretion in the process and will take some comfort that the decision-making process rests firmly within the jurisdiction of the court. Trustees will only be required to act following relevant orders of the court and a valid release authority from the ATO.

However, the discussion paper is silent on how trustees should treat their ‘Know Your Client’ and other obligations arising under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the “AML Act”) and their AML/CTF program.  Trustees would be directed to make a payment from a member’s interest in the superannuation fund, thereby appearing to fall within the definition of designated service number 43 in section 6 of the AML Act, however the service will be being provided to a person other than the member.  In circumstances where the court has made an order and the ATO has issued a release authority, it seems appropriate that trustees be exempted from conducting identity and other checks on the victim to spare them of an unnecessary additional administrative burden at the point of release of the funds.  This could be legislated, along with clear instructions on the details relating to the victim’s personal information that the ATO release order will need to contain to enable trustees to make the payment.

Trustees should also note that the Government proposes that the released amounts are tax-free in the hands of the victim and should therefore be treated as non-assessable, non-exempt (NANE) income at the point of release and payment.  However, where “additional” contributions made by the offender were concessional contributions taxed at the fund level (of 15%), and those contributions later become the subject of a release to the victim under this proposal, only the post-tax value of the “additional” (concessional) contribution would be available to be released and applied to payment of the compensation. Non-concessional (post-tax) contributions would be paid out in full.

[1] Grace Tame “Finally, another win for survivors, this time at predators’ expense”, Sydney Morning Herald 16 December 2022 (https://www.smh.com.au/national/finally-a-win-for-survivors-at-their-predators-expense-20221213-p5c61x.html)

[2] A collaboration between the Grace Tame Foundation, Fighters Against Childhood Abuse Australia, Andrew Carpenter (Webster Lawyers) and the Carly Ryan Foundation.