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Following over 14 months of inquiry, Commissioner Kenneth Hayne (Former High Court Judge) released his report into Misconduct in the Banking, Superannuation and Financial Services Industry.
Since the Report has been released and during the inquiry process we have witnessed the resignation of a number of key executives within the Banking industry.
Family Law delves into every aspect of people’s lives. A significant aspect of ordinary people’s lives is home ownership and consequently the obtaining of finance such as mortgages. Further, since the introduction by the Keating Government in 1992 for compulsory employer contribution to superannuation, superannuation is now a part of our everyday lives and consequently this Report has even further impact as it relates to our retirement savings.
We have witnessed, since at least the commencement of the Commissioner’s inquiry, tighter lending to both commercial and retailer lenders. This has resulted in less credit being made available to consumers, along with stricter criteria or conditions for such credit. Along with a declining property market this is a particular area impacting those who are trying to resolve property settlement issues following the breakdown of their relationship.
It is likely then that property values have reduced, therefore reducing the overall net asset pool and reducing the equity held within a property. This may make it more difficult for one party to retain an item of real property on a final basis as a payment is usually required to the other party, but may not be depending on the other available assets for division. As a result of there being less equity in a property and a requirement of a payment to the other party, it may make it very difficult for some to retain the item of real property. The difficulty arises in their ability to obtain financing for the amount required, and also in their ability to service that loan. Ultimately, a property may need to be sold, or someone may need to provide financial assistance such as a family member or new partner to avoid this. In turn this may also impact on a party’s level of superannuation, or other assets retained on a final basis as other assets are used to ‘offset’ the other assets to arrive at a just and equitable outcome.
Superannuation is not to be forgotten by those many years away from retirement. Superannuation is considered an asset in family law proceedings and will need to be valued, or have a value agreed to. The Superannuation guarantee is currently at 9.5% of an employee’s ordinary earnings and as of 2015, was planned to increase gradually from 2021 to 12% by 2025.
Investment of Superannuation and the ownership of superannuation funds was investigated by the Report. Superannuation is a heavily regulated area and it is likely that this report will only lead to further regulation of the industry.
At present, immediate impact and change has been observed in the provision of lending to retail consumers. Financial institutions are stricter in their lending practices, and will likely be more conservative when it comes to valuing real property. We have also observed the recent two consecutive interest rate cuts by the Reserve Bank of Australia in June and July 2019. This change has also required financial institutions to perhaps loosen lending restrictions to the overall impact of the economy.
It is likely we will soon see the introduction of draft Bills into Parliament. The debate to ensue over any draft legislation following the release of the Royal Commission’s Report will be interesting to observe.
Persons going through a relationship breakdown, either with or without court proceedings, should obtain accounting advice particular to their needs, as well as financial advice to assist them.
In any event, there is likely to be further change in the family law sphere with the recent release of the Australian Law Reform Commission (ALRC) Report into family law and the proposed merger of the Courts that has previously been pressed by the Attorney-General.
Contact Armstrong Legal:
Sydney: (02) 9261 4555
Melbourne: (03) 9620 2777
Brisbane: (07) 3229 4448
Canberra: (02) 6288 1100