Tax Guide For Couples: How does having a spouse affect tax?

This tax guide for couples helps you determine whether you need to include your partner’s information on your next tax return. Read on to learn what you should tell the ATO this year…

Who the ATO defines as a spouse for tax purposes is a common cause of confusion. Once you’re familiar with the definitions, you can determine what, if any, extra information you need to enter on your tax return this year.

What is a spouse for tax purposes?

The answer to this question determines if you need to include their tax information on your tax return.

In the eyes of the ATO, a spouse or de facto is not just reserved for someone who is legally married.

For a person (of either sex) to be considered your spouse or de facto, there are two questions you need to answer “yes” to:

1. Are you in a relationship?
2. Do you live with that person as a couple in a domestic relationship?

If you answer yes to both questions, that person is your spouse or de facto for tax purposes. This means you need to include some of their details on your tax return.

In addition, if you are married, your partner is automatically considered to be your spouse for tax purposes.

Please note that the ATO does not care about sex or gender. For the ATO, the gender of your partner, and your gender, has nothing to do with the definition of a spouse or de-facto partner.

How does having a spouse affect your tax obligations?

In Australia, there is one tax return per person; there is no such thing as a joint tax return or couples’ tax return.

However, if you have a spouse or de facto partner, you must include some of their tax information on your return – and yours on theirs as well.

This includes:

• Salary and wage income,
• Dividends,
• Interest income,
• Rental income,
• Foreign source income,
• If applicable, you must also include child support payments either spouse makes on both returns.

How does having a spouse affect my tax refund?

Once you are defined as having a spouse, certain thresholds for items such as Medicare Levy, Private Health Rebates, Family Tax Benefits and Childcare payments are calculated based on the combined income of both spouses.

Here’s an example:

• Julie and Mark start a relationship and move in together.
• Julie earns $100,000 per year and Mark earns $70,000.
• Neither has private hospital cover.
• Previously, as Julie’s income was above $90,000 she was liable to pay $1,000 of Medicare Levy Surcharge on her tax return.
• However, now that she has a spouse, we use Julie and Mark’s combined income of $170,000. As it’s below $180,000, Julie no longer has to pay any Medicare Levy Surcharge and her refund increases by $1000.

Tax Guide for Couples – Important Point to Note

Many people think they can just “skip” adding their spouse to their tax return. This is a big no-no and the ATO has very sophisticated new data matching techniques to work out when a spouse is missing on a tax return.

If you don’t fill out your spouse details, the ATO could amend your tax return and even issue financial penalties for incorrect lodgements.

It’s important to ensure you and your partner are aware of the tax obligations that come with being in a relationship; fortunately, that’s pretty simple in Australia. You just have to answer a few questions on your tax return.

If you’re not sure whether you need to include your partner on your tax return, just ask Etax support! Our expert team of accountants can quickly determine your obligations and help ensure you get your return right.