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Australia has seen some momentous changes when it comes to the recognition of same-sex relationships in recent years, with the passage of the same-sex marriage legislation in December 2017 marking one of the most significant milestones.
The new legislation has had less impact when it comes to super than in many other areas, however, as both super laws and those around government benefits like the Age Pension have recognised same-sex couples since 2008.
Important note: Given the recognition of same-sex couples in super law, every article on the SuperGuide website applies equally to readers who are single, married, de facto, gay, lesbian or heterosexual.
Background to the same-sex super reforms
It was not that long ago that same-sex couples and families were treated differently to other couples and families for income tax and super law purposes.
Under the super laws in place up to 2004, same-sex couples had fewer rights than heterosexual couples, as two people of the same gender in a relationship were not legally considered to be ‘spouses’. In many cases, they were not even entitled to receive their partner’s super benefits.
The rules at that time also meant same-sex partners were considered non-dependants and were required to pay 31.5% 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, new legislation ensured a surviving same-sex partner was entitled to their partner’s death benefit, but the partner still had to satisfy a test confirming the couple had 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) was passed to provide equal entitlements and responsibilities for same-sex couples in areas such as social security, employment, taxation and super. In the wake of these reforms, same-sex couples are treated in exactly the same way 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 apply equally to all marriages and enable 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 now defines a ‘spouse’ as another 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: Warning, special rules apply
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 your partner’s super benefits, SMSFs and divorce or separation.
1. Making super contributions
Important note: Both contribution splitting and spouse contributions are only available to couples (same-sex and heterosexual), but not single people or anyone who does not meet the ATO’s definition of a spouse (see above).
- Contributions splitting – Under the super rules, you can split your concessional (before-tax) super contributions with your spouse as a way to boost their super account balance. This involves applying to your super fund to transfer or rollover a portion of some 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 concessional contributions cap.
- Spouse contributions – If your spouse is earning less than $37,000 a year, you can top of their super account and claim a tax offset of up to $540 if you both qualify. If your spouse earns more than $37,000, but less than $40,000, you may receive a partial tax offset. There are a number of eligibility criteria for both partners to be able to receive the tax offset.
2. Eligibility for death benefits
Same-sex partners now meet the legal definition of a spouse in both tax and super law, so in the event one member of a couple dies, the surviving partner will receive any super benefits as a death benefit and it will be tax-free if taken as a lump sum.
If you are aged 60 or over and take the death benefit as a super pension, it will also be tax-free unless you are a member of certain public sector super funds. This tax rules applies to all fund members, not just same-sex couples.
3. Setting up and running an SMSF
As same-sex partners are now considered a spouse in both tax and super law, it is straightforward for a same-sex couple to establish and run a self-managed super fund (SMSF).
There are some rules applying to SMSFs, however, that need to be kept in mind. For example, SMSF trustees cannot lend money to a fund member or a relative of a member, so as partners in a same-sex couple are defined as spouses, they are not permitted to make such loans.
4. Relationship breakdown
Under the super laws, benefit splitting has been permitted for both same-sex and heterosexual couples for the past decade. (The exception is Western Australia, which does not permit benefit splitting for de facto relationship breakdowns.)
This means most couples in Australia can take their super assets into account when separating, with each partner’s super benefit taken into consideration when dividing their financial assets.
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 in the case of a relationship breakdown (including same-sex relationships) are very complicated, so ensure your speak to a lawyer with experience in this area. The Federal Attorney-General’s website has fact sheets and detailed information on the super splitting laws.
Social services and same-sex couples
Since 1 July 2009, people living in same-sex relationships have been treated in the same way as heterosexual couples for social services purposes. This means they now receive the same entitlements, are assessed in the same way, and have the same obligations as opposite-sex couples.
Introduction of the reforms meant some same-sex couples and their families became entitled to receive benefits previously not accessible, including:
- partner concession card benefits
- bereavement benefits if a partner died
- 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 Widow Allowance
- War Widow or widowers pension
- access to the Child Support Scheme
- access to the Pharmaceutical Benefits Scheme and Medicare safety nets as a family
- allowing private sector super trustees to make same-sex couples and their children eligible for reversionary benefits
- enabling reversionary benefits from Commonwealth (defined benefit) superannuation schemes to be conferred on same-sex partners and the children of same-sex relationships
- tax concessions.
For more information, see the Department of Social Services (DSS) website.
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:
- in a registered relationship (opposite-sex or same-sex)
- in a de facto relationship (opposite-sex or same-sex).
This definition is important, as it is considered in assessing a number of social security benefits and tax concessions, including:
- Age Pension – The Age Pension is paid to people who meet age and residency requirements, subject to a means test, which includes both an income and an asset test. These tests consider the income and assets of both members of a couple (same-sex and heterosexual) in determining eligibility. The Age Pension rate you receive also differs depending on whether you are a couple living together or living apart due to ill health. For more information, see SuperGuide articles Age Pension: A Super Guide and Age Pension rates (September 2021 to March 2022)
- Seniors and Pensioners Tax Offset – Another concession where your spouse (same-sex and heterosexual) is important is with assessment for the SAPTO, a tax offset which can reduce your tax bill if you are eligible. If both spouses are both eligible for SAPTO, you may even be able to transfer your spouse’s unused offset to the other partner. For more information about SAPTO, see SuperGuide article How does SAPTO work? (Senior Australians and Pensioners Tax Offset)