It sure is. Hopefully, the dust will have now settled over the acrimonious same sex marriage debate. How do the superannuation mechanisms allow death benefits to flow under same sex marriage arrangements? The good news for same sex couples is that the recent changes to marriage laws mesh with the superannuation provisions to place same sex married couples on the same footing as their married heterosexual counterparts. The existing treatment of de facto relationships under the superannuation provisions continues unchanged.
Definition of Marriage
Same sex marriage is now recognised in Australia via the enactment of the Marriage Amendment (Definition and Religious Freedoms) Act 2017. This legislation came into effect on 9 December 2017. This legislation amongst other things altered the definition of marriage contained in the Marriage Act 1961. Marriage under the December 2017 Amendment is now defined as "the union of two people to the exclusion of all others, voluntarily entered into for life". Prior to 9 December 2017, the Marriage Act defined marriage as the union of a man and woman to the exclusion of all others, voluntarily entered into for life."
Definition of Spouse
Superannuation and taxation law use the gender-neutral term "spouse", rather than "husband and wife". The definitions of the term "spouse" in taxation and superannuation legislation do not indicate a starting point but specify inclusions or additions to the term. The Spouse Definition adds two categories to the definition of spouse being certain registered relationships and de facto couples. The de facto addition refers to a "person who is not legally married to the person and lives with the person on a genuine domestic basis in a relationship as a couple."
This means that in interpreting the term "spouse", we would resort to the ordinary meaning of the word, "spouse", and then add the legislated additions. The various dictionary definitions of the word, "spouse" refer to spouses as being life partners in marriage. This means that a person will be a spouse of another when the two marry in accordance with the Marriage Act 1961.
This means that same sex couples who marry and meet the requirements of the Marriage Act 1961 will be spouses for the purposes of the tax and superannuation legislation. This means that same sex spouses can receive lump sum death benefits super on the death of their spouse and receive those benefits in lump sum form free of tax.
Position of De facto Couples
Same sex couples who are not married can also receive lump sum death benefits ex super on the death of their partners and receive these benefits on a tax-free basis. The definition of spouse includes de facto relationships. There is a practical challenge for same sex or heterosexual de facto couples. This challenge is supplying sufficient evidence to show that the domestic circumstances of the couple immediately prior to death meet the definition requirements. This will depend upon the circumstances of the case. There is a wide range of relationships varying from casual intermittent encounters to long lasting relationships no different from a conventional marriage.
The advantage held by married couples over their de facto counterparts is that the mere existence of the marriage automatically qualifies both parties as spouses, irrespective of their circumstances.
Way Forward
From one perspective, the Same Sex Legislation does not alter superannuation matters. Same sex couples prior to this legislation could ensure that their partners received lump sum death benefits tax free using the de facto category under the spouse definition. Same sex couples who marry no longer have this burden and are now on a par with their heterosexual counterparts.
The death benefit tips and traps may vary, but one guiding principle applies to everyone. All clients should consider who should receive their superannuation death benefit and ensure that structures are in place to deliver the desired outcome. The essential test is: Does the arrangement adopted result in the payment of the right amount to the right person at the right time?
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Disclaimer
This information is current as at 21/02/18. This article has been prepared by Heart1Stop, a social media brand owned by Heart Mortgage Services and Heart Financial Advisers. The information contained in this article is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The views expressed here are not those of Heart1stop, Heart Mortgage Services, Heart Financial Advisers, shareholders, directors or staff and associated contractors and business associates. This article has been prepared without taking into account any person’s objectives, financial situation or needs. Because of this, you should, before acting on any information contained in this article, consider its appropriateness, having regard to your objectives, financial situation or needs. Any taxation information contained in this article is a general statement and should only be used as a guide. It does not constitute taxation advice and is based on current laws and their interpretation. Each individual’s situation may differ, and you should seek independent professional taxation advice on any taxation matters. While the information contained in this article may contain or be based on information obtained from sources believed to be reliable, it may not have been independently verified. Where information contained in this publication contains material provided directly by third parties it is given in good faith and has been derived from sources believed to be accurate at its issue date. It is not the intention of Heart1Stop or Heart Mortgage Services and Heart Financial Advisers that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up to date or fit for any purpose; and no party of Heart1Stop or associated entities as mentioned is in any way liable to you (including for negligence) in respect of any reliance upon such information. This article may also contain links to websites operated by third parties ("Third Parties") who are not related to Heart1Stop. These links are provided for convenience only and do not represent any endorsement or approval by us.
