5 financial abuse issues we’re fighting to change

by Verve

Content Warning: This story contains mention of domestic abuse and suicide. 

Financial abuse is linked to domestic abuse. It’s not talked about enough, it’s not reported enough, and it’s not legislated enough. At Verve Super, we say enough is enough.

That’s why we’ve presented the Australian Government with a set of recommendations that we believe would help protect women from poverty after experiencing abuse, close loopholes that allow the financial abuse of superannuation, and increase awareness and protection around this life-and-death issue.

Here are some of the key problems we identified with current regulations in our submission to Parliament, and some of the changes we have recommended to the Senate.

1. Release of funds to perpetrators

Under current government regulations, perpetrators of domestic violence are awarded their victims’ superannuation after they die, including by suicide, basically because of that abuse. If someone has been taking or spending your money, they will be automatically classed as financially dependent or co-dependent, so the funds will go to them and not to your non-binding beneficiary.

Even when the superannuation trustee is aware there’s been financial and/or violent abuse, there is nothing they can do to legally prevent this.    

What’s Verve Super doing about it? We have done some legal work on this topic and identified an article within the SIS legislation that relates to incidents when trustees already have some discretion. Including this scenario in the list of things trustees can use discretion over could be a simple fix without changing the beneficiary laws.

2. Misuse and abuse in Self-Managed Super Funds

As soon as someone switches to a self-managed super fund (SMSF) they are no longer safeguarded by regulations. SMSFs are designed for competent investors with over $500k to play with; but in fact, virtually anyone can shift their superannuation into an SMFS, whether or not they know what they’re doing. It’s very common for couples to set up SMSFs as co-trustees. During our research we heard many examples of women allowing (often by coercion) their partners to transfer their super into an SMSF and take control of it. Their financial abusers are also the trustees of their super funds, able to access them with a few clicks and a signature.

Even in a rock-solid relationship, this weakens women’s agency over their financial future.

What’s Verve Super doing about it? Current financial advice regulations don’t allow super providers to check whether people removing their funds to set up an SMSF are doing it of their own free will – or have the necessary expertise to manage it.

So, we’re advocating for tighter regulations around who can open an SMSF, such as a sophisticated investor test. Have they managed other forms of investments? Have they demonstrated sound investment experience? Are they just relying on their partner? Other forms of investment that already have a sophisticated investor test are being reviewed by the government, so we’ve asked for this to be dialled into that review. SMSFs should also be available only to individuals, not couples, to reduce financial abuse and coercion and promote better financial competence.

3. Not being able to access super following separation

It takes a lot of guts to leave an abusive relationship. But in 99% of cases the abuser also controls the finances, making it almost impossible to access the financial resources needed to escape. For many victims, the abuser cuts them off from shared assets at a time when they need to find a bond and rent money, pay for childcare and often continue to pay for the house they have left, as well. This puts victims at high risk of homelessness and delivers economic shockwaves through the rest of their lives.

The government is introducing a $5k emergency package under the Leaving Violence program for people fleeing abuse, which is great, but it’s not enough to cover these costs. Current legislation that allows the people to use some super in times of economic distress only apply to limited circumstances, and do not consider domestic abuse. We want to be able to help more people escaping abuse from accessing emergency funds at the time they need it most.

What’s Verve Super doing about it? While we’d like to see free accommodation and childcare offered in this situation, as a minimum we would like to see super withdrawals permitted for people escaping domestic abuse, to top up the government’s emergency package.

4. Visibility of superannuation assets during legal settlement

Along with property and savings, super is viewed as a relationship asset, so separating couples can file a claim to each other’s super. However, it’s not that difficult for people to hide their super, for example by putting it in several funds and only declaring one of them. In the case of domestic abuse, a perpetrator can hide his assets from his partner, who, if they are a woman, typically has a lower super balance. At the moment, it can cost upwards of $50,000 to order a full disclosure through court. While the settlement is going through, super is held in a pool of assets that she has no access to, so she’s not even able to use it to cover these costs.

What’s Verve Super doing about it? We highlighted a quick win to Parliament, that’s already used in some European countries: for the ATO to show visibility of their partner’s super as well as their own. Currently, this has to go through a costly court process. Another option is to enable the release of super to cover the legal costs of pursuing a fair settlement. We also want to see a tax relief benefit that enables people to be able to put that money back in if they’ve had to withdraw it.

5. Awareness of financial abuse

Money can be a taboo subject – even more so for financial abuse victims. This is not helpful. Financial abuse is something we should all be talking about. Women and older people are particularly at risk. With older people, their relatives often claim Power of Attorney to assume control of their finances and who gets them after the person dies. For women, having agency over finances enables them to secure their own future.

People do need to understand how the beneficiary system works. The laws around this were written decades ago and we often see situations like someone’s adult children receiving nothing after their death because all their super automatically goes to a new relationship they’re in. This highlights the need for changes to beneficiary legislation.

What’s Verve Super doing about it? We recommended a new national body to drive action against financial abuse. Our staff at Verve undergo training to help identify financial abuse cases; we suggested that more financial sector staff are trained to look out for red flags (such as women moving all their super into a joint SMSF) and are allowed to engage with them to assess the situation. Financial institutions have specialists for scams and fraud, so why not financial abuse? In the meantime, we’ll continue to highlight this issue publicly and with our members.

If you or anyone you know are experiencing thoughts of self-harm or suicide, please call Lifeline on 13 11 14, or text 0477 13 11 14, for free and confidential support. Beyond Blue can also assist you with mental health resources, you can reach out to them on 1300 224 636.  

If you think you or anyone you know may be experiencing domestic violence, help is available. Please reach out to 1800RESPECT, a 24-hour free helpline, on 1800 737 732. 

To access free financial counselling, reach out to Financial Counselling Australia on 1800 007 007. 

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