Tax Tips for Newlyweds

The tax implications of marriage probably aren’t the first thing on your minds as newlyweds. Don’t fret, like you, many have not given given any thought to the potentially important tax consequences of their new married status.

If you are tying the knot anytime soon, check out these tax tips from our Nobel Thomas Melbourne accountants:

The Basics

  • You don’t have to lodge a combined tax return if you’re married (as happens in some other countries). Joint income is recorded separately in each spouses tax returns.
  • You need to show on your tax return that you now have a spouse, and disclose his or her taxable income each year.
  • Your combined income is taken into account if you don’t have private health insurance (you may have to pay the medicare levy surcharge –effectively an additional 2% tax – if you are a high earning couple) as well as when calculating Family Assistance Office benefits such as family tax benefits.
  • If you elect to change your name, the details will need to be updated before your tax return is lodged. The easiest way to do that is online or you can do it by phone. You’ll need to verify your identity with the ATO when you do it, so you’ll need documents such as your birth certificate or marriage certificate. You cannot notify the tax office simply by noting it on the front cover of your next return as used to be the case.

Capital Gains Tax

It is not unusual for each half of a couple to own to own their own home before they married.  Normally, you can sell your main residence without CGT. However, spouses are only entitled to one main residence exemption for capital gains tax (CGT) purposes between them. If both members of a couple each own a main residence they must either:

  • select one residence for the exemption
  • apportion the CGT exemption between the two residences.

Provided the homes meet the requirements for the main residence exemption, they will both be wholly exempt from CGT for the period prior to the couple being treated as spouses. However, from the time the couple get married, they can only have one exemption, although this may be divided between the two dwellings.

Joint Bank Accounts

Will you be setting up a joint bank account to start your life together? The ATO will typically assume a 50/50 split of the interest earned on the joint bank account and add it to each partner’s taxable income accordingly. If, however, you can prove only one partner really benefited from the account, you may be able to assign interest income to them.

Filing Tax Returns

Because you’re legally identified as a spouse there are a couple of changes you’ll need to make when you next file your taxes. There’s the easy stuff, like ticking the box that says you have a spouse and updating your details if you’ve changed your name. Unlike some countries where you can lodge a ‘family return’, in Australia each partner is required lodge an individual tax return.

Both partners in the couple need to alert the ATO when they’ve become a spouse and what their income and assets are. This will help the ATO calculate your eligibility for various entitlements and offsets. This includes the Superannuation Spouse contribution and the Private Health Insurance rebate. You’ll still be able to consider any assets brought into the marriage, like shares for example, as individual assets.

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