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Recent ATO rulings for SMSFs 2 of 2: a former same-sex partner of a member is a 'former spouse'

In another ruling, the ATO has confirmed that an individual is a 'former spouse'[1] of an SMSF member if that individual lived with the member on a genuine domestic basis as a couple, regardless of whether they are of the same sex or different sexes. That is so even if the relationship began before recent amendments to remove discrimination against same-sex couples.[2]

Alastair Keith

Background to ruling

X was a member of an SMSF.
X died.

Before the 2008-2009 financial year, X had lived with Y on a genuine domestic basis as a same-sex couple.

The definition of 'spouse' changed from the 2008-2009 financial year to include same-sex couples.

The question for the ATO was whether Y was the 'former spouse' of X for the purposes of determining the taxation treatment[3] of an SMSF death benefit that Y received during the 2010-2011 financial year.

Tax treatment of superannuation death benefits

When an SMSF member dies, the payment of that member's money is a 'superannuation death benefit'. This amount can be paid as a lump sum, or an income stream. If the amount is paid to someone who is the member's 'death benefits dependant', then concessional tax benefits apply to the payment. 'Death benefits dependant' is defined[4] to include the deceased SMSF member's spouse or former spouse.

Recognition of same-sex relationships

Before the 2008-2009 financial year, same-sex partners of SMSF members were excluded from the definition of 'death benefits dependant' — unless they were financially dependent on the SMSF member or living with them in an interdependency relationship.

However, the law about this was amended from the 2008-2009 financial year so that 'spouse' now includes someone who, although not legally married to the SMSF member, lives with them on a genuine domestic basis as a couple — whether that person is of the same or opposite sex.

The definition that applies before and after the change
Before 2008-2009 financial year From the 2008-2009 financial year

'Spouse' and 'former spouse' includes living together on a genuine domestic basis as husband and wife

'Spouse' and 'former spouse' includes Living together on a genuine domestic basis as a couple

Why was a ruling required?

Although the legislative changes discussed above provided for concessional tax treatment for the payment of death benefits to same-sex partners, the ruling was required as to whether a person was the former spouse of an SMSF member was to be determined with regard to the definition of spouse applying at:

  • the time of the relationship; or
  • the time of the death benefit payment.

In this case, Y lived with X before the definition of 'spouse' was changed in the 2008-2009 financial year. This mattered because:

  • if the current definition of 'spouse' applied, then Y would be the 'former spouse' of X, and entitled to the concessional tax treatment.
  • if the earlier definition applied, then Y would not be the former spouse and would not be entitled to the concessional tax treatment.

ATO reasoning

The ATO considered whether the law was meant to operate prospectively or retrospectively, and noted that the changes to the law did not show any intention to apply retrospectively.

The ATO acknowledged that the legislation did not impose any constraints on the period to which the new definition operated and allowed the decision to be made on the basis of the facts before the operation of the new definition of 'spouse'. Therefore, the definition of 'spouse' at the time of the death benefit payment could be used to determine whether Y was the 'former spouse' of X.

In forming this view, the ATO considered that this did not involve a retrospective operation of the law. Rather it viewed the adoption of the amended definition of 'spouse' as a prospective operation of this amended definition, with a reference to past facts.


Accordingly, Y was the 'former spouse' of X for the purposes of the payment and was entitled to the concessional tax treatment.[5]

What does this ruling mean?

This ruling means that former same-sex partners of SMSF members whose relationships began before the 2008-2009 financial year will be considered as the 'former spouses' for the purposes of being a 'death benefits dependant', and will enjoy tax concessions on these benefits.

The ruling confirms that the amendments to the ITAA have removed any discrimination and ensured that 'spouses' of either gender will be treated the same.

More information from Maddocks

For questions or more information about the above article, please call Maddocks in Melbourne (03 9288 0555) and ask for a member of the Superannuation Team.

More Cleardocs information on SMSFs

You can read other articles concerning superannuation and SMSFs here.

Order SMSF related document packages


Download a checklist of the information you need to order a document package.

[1] This definition applies under paragraph 302-195(1)(a) of the Income Tax Assessment Act 1997 (Cth) (ITAA 97)

[2] ATO ID 2011/83

[3] Paragraph 302-195(1)(a) of the ITAA 97

[4] Paragraph 302.195 of the ITAA 97

[5] Paragraph 302-195(1)(a) of the ITAA 97


Lawyer in Profile

Leigh Baring
Leigh Baring
+61 3 9258 3673

Qualifications: LLB (Hons), BEc (Hons), Monash University

Leigh is a Partner in Maddocks Tax and Structuring team. Leigh has extensive experience in advising Australian and multinational companies, high net worth individuals, accountants and financial advisers on all areas of taxation law.

Leigh regularly provides advice on:

  • structuring of businesses and transactions,
  • mergers and acquisitions,
  • corporate reorganisations and distributions,
  • sale of businesses,
  • demergers,
  • capital raisings,
  • joint ventures and property developments,
  • international tax (both inbound and outbound), and
  • succession planning and liquidations.

His advice covers both direct and indirect tax considerations.

Throughout his career, Leigh has been at the forefront in developing tax-effective corporate, trust and superannuation structures.

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