What are the super and Age Pension rules for same-sex couples?

Over the years Australia has seen some momentous changes in the treatment of same-sex and de facto relationships when it comes to superannuation benefits.

For many years, same-sex couples were not legally considered spouses or de factos and were not entitled to receive their partner’s super benefits.

All that has changed now, with the introduction of same-sex marriage and legal recognition of same-sex de facto relationships extending equal treatment to all couples. 

Background to same-sex super reforms

Under the rules in place until 2004, same-sex couples had fewer rights than heterosexual couples within the super system, as two people of the same gender in a relationship were not legally considered to be spouses or de facto.

The rules at that time also meant that same-sex partners were considered non-dependants and were required to pay tax on any super death benefits they received when their partner passed away. Partners in a heterosexual couple, however, were considered dependants under super law and received their benefit tax-free.

From June 2004, legislative reforms ensured a surviving same-sex partner was entitled to their partner’s death benefit and could receive it tax-free, but the partner still had to satisfy a test confirming they had been in an interdependency relationship.

In 2008, a wide-ranging suite of federal reforms (Same-Sex Relationships (Equal Treatment in Commonwealth Laws-General Law Reform) Bill 2008) finally provided equal entitlements and responsibilities for same-sex couples in areas such as social security, employment, taxation and super. Following these reforms, same-sex couples are treated the same as a married or de facto heterosexual couple under the super rules.

On 8 December 2017, the Marriage Act 1961 was amended to redefine marriage as ‘a union of two people’. The reforms also introduced non-gendered language, so the requirements of the Act applied equally to all marriages and enabled same-sex marriages solemnised under the law of a foreign country to be recognised.

Following the amendments to the Marriage Act, the ATO extended the definition of a spouse in taxation law to recognise de facto relationships and registered relationships. The ATO currently defines a spouse as a person (whether of the same sex or opposite sex) who:

• Is in a relationship with you and that relationship is registered under a prescribed state or territory law
• Although not legally married to you, lives with you on a genuine domestic basis in a relationship as a couple.

Couples and super

When you are part of a couple, whether it’s same-sex or heterosexual, there are some special rules that apply under the super legislation, particularly when it comes to making contributions, eligibility to receive your partner’s super benefits, SMSFs, and divorce or separation.

1. Making super contributions

If your relationship meets the ATO’s definition of a spouse, you can boost your partner’s super by:

• Contribution splitting – Under the super rules, you can split your concessional (before-tax) super contributions with your spouse to boost their super balance. This involves applying to your super fund to transfer (rollover) a portion of the contributions you recently made into your super account to your spouse’s super account. It’s important to remember that under the contributions splitting rules, if you split your concessional contributions with your spouse, the entire amount still counts towards your annual concessional contributions cap ($30,000 in 2024–25).
  
• Spouse contributions – If your spouse is earning less than $37,000 a year, you can contribute to their super and claim a tax offset of up to $540. If your spouse earns more than $37,000 but less than $40,000, you can receive a partial tax offset. There are eligibility criteria that both partners need to meet to be able to receive the tax offset.

2. Eligibility for death benefits

Same-sex partners meet the legal definition of a spouse in both tax and super law, so when one member of a couple dies, the surviving partner is eligible to receive their partner’s accumulated super as a death benefit. If there are other dependants, such as children, they will also be considered to receive a portion of the benefit unless a binding beneficiary nomination is in force in favour of the surviving partner alone.

Super death benefits paid to a spouse are tax-free if taken as a lump sum. If you or your partner (at the time of their death) are aged 60 or over and you take the death benefit as a super pension, generally it will also be tax-free.

These tax rules apply to all fund members, not just same-sex couples.

3. Setting up and running an SMSF

Same-sex partners are considered spouses under both tax and super law, so it’s straightforward for a same-sex couple to establish and run their own self-managed super fund (SMSF).

There are some rules applying to all SMSFs, however, that you need to keep in mind. For example, SMSF trustees cannot lend money from the fund to a fund member or a relative of a member. This means that as partners in a same-sex couple are defined as spouses, you are not permitted to make such loans to your spouse or their relatives. You also need to take care with the rules relating to related parties and the SMSF’s investments.

4. Relationship breakdown

Under the super laws, splitting a super benefit is permitted when your relationship (same-sex or heterosexual) breaks down. (The exception was Western Australia, but from September 2022, super benefits in a de facto relationship in that state are now available for splitting.)

Separation and divorce are very difficult – both emotionally and financially – and it’s important to consider your super benefits when it comes to splitting your assets. The rules around splitting super benefits after a relationship breakdown (including same-sex relationships) are very complicated, so speak to a lawyer with experience in this area.

To help separating couples, the Australian Attorney-General’s website has fact sheets and detailed information on the super splitting laws and the way super benefits are valued prior to splitting. It’s important to understand how the splitting laws will work before finalising a financial settlement with your former partner.

Background to social services and same-sex couples

People living in same-sex relationships have been treated in the same way as heterosexual couples for social services purposes since 1 July 2009. This means they receive the same entitlements, are assessed in the same way, and have the same obligations as an opposite-sex couple.

Before 2009, some same-sex couples and their families were not entitled to receive many social security benefits. Since then, they are entitled to claim the following benefits:

• Partner concession card benefits
• Bereavement benefits if a partner dies
• Exemption of the family home from the assets test when one partner enters nursing home care and the other partner continues to reside there
• Recognition as independent for Youth Allowance if in a same-sex relationship for over 12 months
• Lesbian relationships recognised as a qualifying relationship for the Widow Allowance
• War Widow or Widower’s Pension
• Access to the Child Support Scheme
• Access to the Pharmaceutical Benefits Scheme and Medicare Safety Nets as a family
• Reversionary pension benefits from private sector super trustees
• Reversionary pension benefits from Commonwealth super schemes
• Tax concessions.

What is the DSS definition of a spouse?

Under the social security and family assistance rules, a person is regarded as a member of a couple if they live with (or usually live with) their partner, and are either:

• Married
• In a registered relationship (opposite-sex or same-sex)
• In a de facto relationship (opposite-sex or same-sex).

When determining if a person is in a couple relationship, Centrelink considers the following five factors:

1. The financial aspects of the relationship
2. The nature of the household
3. The social aspects of the relationship
4. Any sexual relationship between the people
5. The nature of their commitment to each other.

The definition of a couple relationship is important, as it is considered in assessing various social security benefits and tax concessions, including:

• Age Pension – The Age Pension is paid to people who meet the age and residency requirements and are subject to a means test (which includes both an income and an assets test). These tests consider the income and assets of both members of a couple (same-sex and heterosexual) in determining their eligibility. The Age Pension payment rate you receive also differs depending on whether you are a couple living together or living apart due to ill health.

• Seniors and Pensioners Tax Offset (SAPTO) – Another government benefit where your spouse (same-sex and heterosexual) is important relates to the assessment for SAPTO. This can reduce your tax bill if you are eligible for it to be applied to your income tax return. If both spouses are eligible for SAPTO, you may even be able to transfer a spouse’s unused offset to the other partner.