3 Life Events that will Change Your Taxes: Marriage

Part Two: Tying the Knot

Decorations, cake, and tax planning doesn’t sound like it goes together, but if you want to get a handle on your finances, taxes should be high on your list when tying the knot.

In the second part of our three-part series, we touch on how marriage has an impact on tax. Scroll to the bottom if you want to view Part One: Investment Properties.

You still have to do your own tax return

While the law officially recognises you as a couple when you get married, you still need to do individual tax returns.

What you do need to do is specify that you have a spouse, including their full name and date of birth, and disclose their taxable income. You also need to include the date when each of you became partners.

The reason you have to disclose your spouse’s details is to work out your eligibility for government entitlements and tax offsets/rebates. If you don’t disclose the correct figures, the wrong entitlement or offset may be claimed.

Private health insurance with a combined income

When you combine incomes, you should note the total amount when it comes to insurance. If your joint income exceeds $180,000, you should take out cover, as you’ll be otherwise liable for the Medicare Levy Surcharge, which can be up to 1.5% of your income.

Married couples need to watch out for Capital Gains Tax

If you both own a home when you tie the knot, you need to look out for a little thing called Capital Gains Tax (CGT) - for example, the tax realised from the sale of your property. Spouses can only be exempt for CGT purposes as one, so you must either:

•    select one residence for the CGT exemption

•    allocate the CGT exemption between the two homes

Growing old together

So, you’ve chosen someone to grow old with you, and that means you can share everything, even your super.

Provided the spouse is under the age of 65, the higher earning one of the couple can contribute to the super of the non-working or lower-income-earning person’s super fund.

Once the couple reaches the legal age, they can take it out tax-free.

When you’re not married, but still considered a spouse 

You may not be planning your big day, but you still could be considered a spouse by the Australian Tax Office (ATO).

The ATO defines a spouse as “a person (of any sex) who:

"- you are in a relationship with that is registered under a prescribed state or territory law

- although not legally married to you, lives with you on a genuine domestic basis in a relationship as a couple.”

So even though you haven’t married, you could already be considered a spouse according to the ATO. They can check up on this information if you’ve taken out private health insurance together, or you’ve detailed the same residence on your tax return.

Last month, we spoke about investment properties in our three-part series on major life events that impact taxes. Stay tuned for Part Three: Starting a Family.

If you need advice on any of the above, please feel free to contact us.

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