Although debate has raged in Australia over same-sex marriage, the country’s superannuation system has developed in such a way that same-sex couples can be treated the same as married or heterosexual couples. However, many people are still confused about the rights of same-sex couples concerning superannuation, especially Self-Managed Superannuation Funds (SMSFs).
SMSFs have traditionally been used for a husband and wife to combine and manage their superannuation funds together in the one fund. However, you don’t need to be married to join forces with someone and set up a SMSF. Many people do it with friends, siblings, business partners and de-facto partners.
In 2008, an important change was made to superannuation legislation regarding who is, or is not, a “spouse”. This change opened the door to several superannuation entitlements, including the SMSF definition of a spouse for same-sex couples. Those who are now regarded as spouses under the law include:
- a) A couple in a relationship who have had their relationship registered under the law of a state or a territory, and
- b) Persons who live together in a genuine domestic relationship as a couple, regardless of their gender
Source: ATO
This change has effectively given same-sex couples the same rights as married couples when it comes superannuation. This means same-sex couples can:
- Split superannuation contributions
- Make spousal contributions
- Receive tax concessions on death benefits
- Receive death benefit pensions
- Establish SMSFs together
Source: Macquarie
SMSFs – ALL COUPLES TREATED THE SAME
This definition of a spouse means that SMSF regulations are similar for married, unmarried, de-facto, and same-sex couples. A further extension of the regulations means that a relative can be defined as a spouse for the purposes of superannuation, so that relatives in an employee/employer relationship may be members of the same SMSF.
In deciding whether to enter into an SMSF with a same-sex partner, the circumstances of each individual must be considered, whether it involves a same-sex couple or otherwise. You must make sure that you both agree on what outcome you are expecting from your superannuation. Members of the same SMSF may be of
- different ages
- hold different balances or
- have different attitudes towards investment risk
A couple as Trustees of a SMSF can complete a Binding Death Nomination to ensure their SMSF assets are left to the person/s of their choice should they pass away. Your super DOES NOT automatically form part of your estate upon death.
It can be beneficial to combine superannuation balances under an SMSF. When this is done, only one set of administration fees will be payable, so running costs may be reduced. Higher balances may also give greater purchasing power, opening the way to a wider range of investment options including an investment property.
One way to manage an SMSF is for all members’ balances to be used in the same investment strategy. If a couple does not agree on the ways in which they wish their SMSF funds to be invested, they need to discuss this. If different investment strategies are run within an SMSF, many of the cost savings associated with SMSFs can be wiped out.
Partners also need to agree on details such as their bank provider, whether a specialist SMSF administrator should be appointed, and how much advice to take before deciding to set up an SMSF.
Although it is still not clear whether same-sex marriage in Australia will be approved, same-sex partners can certainly set up an SMSF and enjoy all the benefits available to other couples. By the same token, same-sex couples need to undertake the same planning, and exercise the same care, when deciding whether an SMSF is the best option for them. Most importantly of all, they need to seek advice from an expert Financial Planner who specialises in SMSFs.
Source: ATO
At Assure Wealth, we specialise in helping busy, successful families get their financial house in order, bring structure to their finances, and achieve financial peace of mind. We have a particular focus on helping clients establish self-managed superannuation funds (SMSF), and self-managed superannuation property investment portfolios. We charge on a fee for service basis to offer complete transparency on costs.
Author: Pat Casey – Managing Director, Assure Wealth
