By Monica Rule

The same-sex marriage postal survey is now arriving in letter boxes across Australia. But did you know that whatever your marital status or sexual orientation, the superannuation law treats everyone the same? This Bulletin looks at same-sex couples and how the superannuation law applies to them.

In 2008, the superannuation law was amended to treat everyone equally regardless of whether they were married, de facto heterosexual couples, or in a same-sex relationship. The law extended the word “spouse” – which traditionally only included opposite sex partners - to include another person (whether of the same sex or opposite sex) with whom the person is in a relationship that is registered under a certain state or territory law; or another person who, although not legally married to the person, lives with the person on a genuine domestic basis in a relationship as a couple. This means, the superannuation law treats same-sex couples the same way as a married or de facto heterosexual couple with regards to their superannuation entitlements. Also in 2008, the Family Law Act was amended to broaden the definition of “de-facto” to include same-sex relationships.

Establishing and running a Self Managed Superannuation Fund

Generally, a person cannot be in a Self Managed Superannuation Fund with another person that they work for, unless the person is a relative of the other person. As same-sex couples are considered related, they can be in an SMSF together if one works for the other. One thing to be aware of is that because a same-sex partner is considered a “relative”, their SMSF cannot lend money to a member or relative of a member. 

Superannuation contributions splitting

Same-sex couples are eligible for superannuation splitting which allows a same-sex partner to transfer 85% of their concessional (before tax) contributions into their spouse’s superannuation account. Superannuation splitting has become more popular since the $1.6 million  limit was placed on retirement pension accounts and the total superannuation balance (for eligibility to make further contributions). Splitting superannuation between couples, allows couples to even out their retirement pension accounts and their superannuation balances which may enable them to make further contributions. A member (of any age) can split their contributions with their spouse, as long as the spouse is under the age of 65 and is not retired from the workforce.

Spouse contribution tax offset

Same-sex partners can make non-concessional (after-tax) contributions of up to $3,000 on behalf of their partner (who is under the age of 70) and be entitled to a maximum tax offset of up to $540 ($3,000 x 18%) if their partner’s assessable income (including total fringe benefits amounts and reportable employer superannuation contributions) for the financial year is less than $40,000. To be eligible for the full tax offset, the partner’s annual income must not exceed $37,000.  The tax offset gradually reduces once the partner’s income exceeds $37,000 and cuts out altogether once the income reaches $40,000. If the partner is aged 65 to 69, they must be working at least 40 hours over 30 consecutive days. Both must be Australian residents for income tax purposes and not be living separately and apart on a permanent basis at the time the contribution is made. Contributions made on behalf of the partner will count towards the receiving partner’s non-concessional contributions cap. Therefore, the receiving partner’s total superannuation balance must not exceed $1.6 million immediately before the start of the financial year in which the contribution is made. Contributions that are split into a partner’s superannuation account do not qualify for the tax offset.      

Death benefits

Same-sex couples are eligible for death benefits from their deceased partner’s superannuation fund. They do not need to pass special tests confirming that they had an “interdependent” relationship or a financially dependent relationship. This includes former spouses of same-sex couples. It also means that they receive the same favourable tax treatment as heterosexual couples on the payout of death benefits. That is, a tax free lump sum payment; or tax free pension if the deceased is aged 60 or over upon their death, or the surviving partner is over 60. 

Relationship breakdown

Same-sex de facto couples in most States and Territories are covered by the Family Law Act 1975 and have the same rights as heterosexual de facto couples in the event of a relationship breakdown for the division of assets and superannuation.

For Gold and Platinum members, Monica has provided scenario based examples of how the superannuation law applies to same-sex couples.

Disclaimer: The content of this Bulletin is general information only. It is not legal advice. The statements and opinions are the expression of the author, not Law Central, and have not been checked for their accuracy, completeness or changes in the law. Law Central recommends you seek professional advice before taking any action based on the content of this Bulletin.

Related documents:

• Pension Pack for Self Managed Super
• SMSF - Update Rules
• Build a Company (ELodgement)

Related webinars:

• Webinar Recording - Understanding The 2017 Superannuation Changes
• Webinar Recording - Time To Address The SMSF Sleeper - Estate Planning Within The Fund