Money and Life
(Financial Planning Association of Australia)
Since marriage equality was achieved in 2017, LGBTI people have had access to the same legal and financial rights as heterosexual married couples. Yet members of the LGBTI community still face some unique challenges when it comes to their financial wellbeing. So what do same sex couples need to know when it comes to planning their financial lives together?
It’s been a long, hard road for Australia’s LGBTI community to achieve equality under the law, but thankfully, that’s now the case. From the Same Sex Relationships Act 2008, to the Sex Discrimination Act 1984 amendment in 2013,and more recently, the Marriage Act 1961 amendment in 2017, LGBTI people have won the right to live, work and marry free of discrimination.
Despite the progress, some LGBTI people – who make up approximately 11 per cent of the population – still experience discrimination, harassment and hostility in many parts of everyday life.
Research suggests this has a direct impact on their financial wellbeing, with LGBTIQ people 28 per cent less likely to own the home they live in, twice as likely to be single, and less likely to share their expenses, assets and retirement savings.
Challenges for de facto couples
For members of the LGBTI community who are in a de facto relationship (unmarried), there can be some extra hurdles when it comes to accessing their legal and financial rights.
As Associate Professor Fiona Kelly and Hannah Robert, of La Trobe University, wrote at the time of the marriage equality debate in 2017, “while de facto couples may be able to assert some of the same rights as married couples, they often have to expend significant time, money and unnecessary heartache to do so”.
If you’re in a de facto same sex relationship, here are three areas worth paying extra attention to:
Tax time – do I have a spouse?
The ATO considers you to have a ‘spouse’ for tax purposes if another person (of any sex) lived with you on a genuine domestic basis in a relationship as a couple. The ATO doesn’t specify how long you need to have been in a relationship or living together.
If you have a spouse under tax law, you’ll need to include details of their income in your tax return. This is used to work out your household income, which affects your Medicare levy surcharge and private health insurance rebate, as well as certain tax offsets and benefits.
Read more: Advice for couples at tax time
Keeping your estate planning documents up to date is especially important for de facto LGBTI couples, so you can be sure that your affairs will be handled according to your wishes.
As Hall & Wilcox lawyers point out, “a de facto partner may not be considered next of kin and allowed to make medical and end of life decisions on behalf of their partner, or may have problems in proving their right to their deceased partner’s estate. This can force them to have to prove their relationship status in Court and is one of the significant legal benefits of marriage, as it removes this risk.”
An estate plan sets out what you’d like to happen to your assets and affairs when you pass away, or if you’re no longer able to manage your own affairs. It typically includes several documents that give instructions on how to distribute your financial assets, as well as who will have responsibility for the care of any dependents. These include:
- your will
- total and permanent disability (TPD) and life insurance
- superannuation death benefit nominations
- powers of attorney and/or guardianship.
Inheritance law can be complex, so it’s important to get professional legal advice to draft your estate planning documents.
What about my superannuation?
Superannuation law is another area that has undergone major reforms to standardise the financial rights for LGBTI individuals. Since 2008, same sex couples have been entitled to:
- nominate and receive superannuation death benefits upon the death of a spouse
- receive tax concessions on super death benefits
- split superannuation contributions
- make and receive a tax offset for spousal contributions
- establish SMSFs together
If you’re in a de facto relationship, you’ll need to take extra steps to make sure your super death benefits (including any insurance benefits) are paid as you intended.
The safest way to ensure your superannuation is paid to your partner, or another dependent of your choice, is to fill out a Binding Death Benefit Nomination. You must renew the binding nomination every three years to keep it current.
Simply nominating a recipient in your will isn’t enough, because superannuation proceeds don’t form part of your estate in death. Instead the trustee of your super fund must pay your benefit to “a surviving partner, children or dependents, or to the deceased’s estate”. If there’s no Binding Death Benefit Nomination in place, the trustee may distribute the funds according to your wishes – or not.
Again, make sure you seek professional legal advice if you’re in any doubt about the best way to ensure your assets are distributed according to your wishes.
Marriage equality was a major step towards bridging the gap between same-sex and opposite sex-couples when it comes to their legal and financial rights. As social attitudes and values continue to play catch-up, a growing number of LGBTI people are choosing to access quality financial advice to help them plan for their family’s financial future.