The Same-Sex Relationships (Equal Treatment in Commonwealth Laws - Superannuation) Act 2008 received royal assent on 4 December 2008. The Act modifies the definition of 'child' and 'spouse' in key pieces of superannuation and tax law. The changes will affect people in same-sex relationships regarding means-testing for the Government co-contribution, payment of superannuation benefits, and concessional tax treatment of death benefits.
Superannuation Law
The Act modifies the definitions of 'child' and 'spouse' in the Superannuation Industry (Supervision) Act 1993 (SIS Act) by replacing references to persons living 'as husband and wife' with a reference to persons living 'as a couple'. The new definition expands the persons who can be considered a 'spouse' or 'child' of a person for the purposes of related party transactions and, more significantly, when determining the person's superannuation dependants for the purposes of paying benefits (the current law does not recognise a same-sex partner as a 'spouse', or the child of a same-sex couple as the child of both persons, only of the biological parent, for the purpose of paying death benefits).
The amendments to the definition of 'child' mean that, in the context of a same-sex relationship, the person must be the biological parent of the child, or the child must be the product of the relationship (ie adopted or conceived during the course of the relationship), for the child to be able to receive benefits from the person. For example, if a person forms a same-sex relationship and their new spouse already has a child from a previous relationship, the child will not fall within the amended SIS Act definition because there is no biological connection between the person and the child, and the child is not the product of the relationship.
The Act also amends the definition of 'spouse' in the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 (Co-contribution Act) for the purpose of the means-test for the Government co-contribution to include a person who 'is in a relationship as a couple' with a beneficiary of a Government co-contribution, whether the beneficiary and the person are different sexes or the same sex (the law currently refers to a person living 'as the beneficiary's husband or wife').
Tax Law
The meaning of 'spouse' and 'child' in the Income Tax Assessment Act 1997 (1997 Act) has been modified by reference to the amended definitions in the SIS Act. The amendments remove the differential treatment between opposite-sex couples and their children, and same-sex couples and their children, with regard to the ability of a trustee of a superannuation fund to make 'anti-detriment' payments (section 295–485 of the 1997 Act), and for the purposes of taxation of superannuation death benefit payments, superannuation death benefits paid in special circumstances and death benefit termination payments (Subdivision 82-B of Division 82, Division 302 and section 303–5 of the 1997 Act).
Under current income tax law, a member of a same-sex couple who receives his or her deceased partner's superannuation death benefits is concessionally taxed only where the person satisfies the criteria of an interdependency relationship with the deceased member. If the criteria cannot be satisfied, the person is unable to receive the deceased member's benefits as a reversionary pension, and will be taxed as a non-dependant on lump sum death benefit payments.
The modified meaning of 'spouse' in the definition of 'death benefits dependant' ensures a member of a same-sex couple is taxed concessionally on the deceased member's death benefits, regardless of whether he or she satisfies the interdependency criteria. Similarly, upon the death of a person in a same-sex relationship, a child of that relationship who is under 18 years of age is taxed concessionally on receipt of the deceased member's superannuation death benefits.
When?
The amendments to the definitions of 'spouse' and 'child' in the superannuation law apply to the 2008-09 year of income and later years. The modified meaning of 'death benefits dependant', 'spouse' and 'child' in the death benefit provisions of the 1997 Act apply to the 2008–09 income year only because it is intended that legislation designed to remove same-sex discrimination in tax law more generally will apply from the 2009–10 income year.
What should you do?
The changes to the definition of 'child' or 'spouse' are mainly relevant to the payment of benefits, and particularly death benefits. In light of the changes, you should:
- if you have a self-managed superannuation fund, review your fund deed to ensure that it allows for benefits to be paid in accordance with the new definitions (many deeds will define a 'dependant' in accordance with the previous definitions of 'child' and 'spouse');
- review reversionary nominations in pensions to determine whether you wish to nominate a new reversionary beneficiary in light of the changes to the definition of 'dependant'; and
- consider whether you need to review any death benefit nominations given that a 'dependant' for the purposes of superannuation and tax law can now include a same-sex partner or a child who is the product of a same-sex relationship.
Our deed has been updated to reflect these changes.