Same-sex couples’ superannuation rights explained

The debate over same sex marriage in our Federal Parliament last year did not result in a change in the current status of same-sex unions. This does not mean, however, that same-sex couples have no recognition in existing law.

Same-sex couples are treated as equitably as heterosexual couples when it comes to superannuation. This became effective five years ago when in 2008 the law extended the word “spouse” – which traditionally only included opposite-sex partners – to include:

  • a same-sex partner that one is in a relationship with that is registered under a certain state or territory law, or
  • a same-sex partner who, although not legally married, lives on a genuine domestic basis in a relationship as a couple (otherwise known as a de-facto relationship).

Similarly, a Family Law amendment in 2008 broadened the definition of “de-facto” to include same- sex relationships and extended the definition of “child” to include the individual’s adopted child, stepchild or ex-nuptial child, and a child of the individual’s spouse or someone who is a child of the individual within the meaning of the Family Law Act 1975.

The reforms brought equality to areas of tax, social security, health, aged care and employment through key changes that focused on:

  • superannuation contributions splitting
  • superannuation spouse tax offset
  • establishing and running a self-managed superannuation fund (SMSF)
  • death benefits, and
  • relationship breakdown.

Superannuation contributions splitting

Same-sex couples are now eligible for superannuation contribution splitting, which allows a same-sex partner to direct superannuation contributions into their spouse’s account to boost their retirement savings. You can apply to split contributions regardless of your own age, but your spouse must be either less than 55 years old, or between 55 and 64 years old and not retired.

Superannuation spouse tax offset

Same-sex partners can make after-tax contributions of up to $3,000 on behalf of their spouse and be entitled to a maximum tax offset of up to $540 (18% of $3,000) if the sum of their spouse’s assessable income – including total fringe benefits amounts and reportable employer super contributions for the financial year – is less than $13,800.

Establishing and running an SMSF

The broadening of the definition “spouse” to include same-sex partners has greatly affected SMSF trustees because:

  • the eligibility rules for SMSF members have become a lot clearer for a same-sex couple wanting to run an SMSF together
  • a same-sex partner is now considered a “relative” which means SMSF trustees cannot lend money to their same-sex partners as they constitute a “relative of a member”, and
  • anti-detriment payment rules now apply to the dependant of a same-sex partner.

Death benefits

In the event of the death of a spouse, same-sex partners and their children can now receive a death benefit from their partner’s private superannuation fund.

Same-sex partners are also eligible for the same death benefit tax concessions that opposite-sex couples are provided when they receive a superannuation lump sum death benefit. If same-sex partners want to challenge a death benefit payment decision, they can do so now via the Superannuation Complaints Tribunal.

In regards to public sector funds, if a same-sex partner dies and they were receiving a defined benefit pension from a public sector fund, their spouse and children now receive equal access to death benefits and reversionary pensions under public sector fund schemes.

Same-sex partners were entitled to their spouse’s superannuation benefits prior to 2008 but they had to satisfy a special test confirming they had an “interdependent” relationship or a financially dependent relationship.

Before 2004, it was highly unlikely that a same-sex partner could even receive his or her partner’s death benefits – and even if they did receive these death benefits, 31.5% tax was typically deducted from the benefit (as the recipient was not considered to be a dependant).

Relationship breakdown

Same-sex de-facto couples have the same rights as heterosexual de-facto couples in this unfortunate event. A same-sex couple can take superannuation assets into account when parting ways and benefit splitting is now permitted. You may wish to read the article in the December Monthly Client Newsletter entitled Superannuation and relationship breakdowns: who gets what. However, the rules that apply to de-facto couples – be they opposite-sex or same-sex – are still more complicated than the rules for married couples.

Same-sex couples can now also access the Family Court of Australia or the Federal Magistrates Court for property division or spousal maintenance matters as they are now covered by the Family Law Act 1975.

Consult this office if you wish to find out more about same-sex couples’ superannuation rights.

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