In 2022 Tax Tips

Advice For Couples At Tax Time

The time of year when taxes need to be filed can be stressful for couples, particularly if they have not prepared themselves in advance. The purpose of this article is to offer some helpful tips that will make the process go more smoothly. By keeping in mind the following advice, you will be able to simplify the process of filing your taxes and steer clear of any potential difficulties. There is no need to further complicate things by adding additional stress to the mix; taxes are already difficult enough as it is. Continue reading for some helpful suggestions that will hopefully make filing your taxes a little less stressful.

The time of year when taxes need to be filed may be very stressful for couples, particularly if they are not prepared. The following are some suggestions that, if followed, will make the procedure somewhat less difficult: First things first, double-check that you have all of the necessary documents in place. This includes your W-2s and 1099s, in addition to any other documents that may be pertinent. Next, choose who will be responsible for filing the documents.

Determine who will be responsible for what if the two of you wish to go through with it. Last but not least, take the initiative to obtain your reimbursement. You should initiate the process of verifying the status of your return as soon as you are able to so that you can obtain your money in the shortest amount of time possible. If couples follow these guidelines, they should have an easier experience during tax season and be able to rest assured that everything will run well.

Tax time guidance for couples

Confused about how your marital or other status affects your tax obligations? With our instructions geared specifically toward married couples, filing taxes is now a breeze.

You might not realize that there are some changes that need to be made to your tax filing if you are just married, engaged, or living with your partner for the first time.

There is no requirement that you file a joint tax return with your spouse every year if you are a resident of Australia. Instead, you are required to report the taxable income earned by your spouse on the form that you file for yourself.

Your combined income is one of the factors that the Australian Taxation Office (ATO) considers in determining whether or not:

  • you are eligible to receive a reimbursement for your private health insurance (and how much you might expect to receive);
  • You will be required to make a payment toward the Medicare levy surcharge;
  • You are eligible for a reduction in your Medicare tax contribution;
  • You are eligible to receive the tax credit for elderly citizens and pensioners.

First things first: how can you tell if the Internal Revenue Service considers you to have a “spouse”?

Is My Current Relationship Formal Or Informal?

According to the Australian Taxation Office (ATO), the term “spouse” refers to “another individual (of either sex) who:

  • you were involved in a relationship with someone who was required to be registered under the laws of a state or territory;
  • despite the fact that you are not legally married to each other, they lived with you on a genuine domestic basis as a couple when you were together.

You are required to include in your return a full accounting of any taxable income received by your spouse, including the following items:

  • salaries, as well as wages;
  • dividends;
  • interest;
  • rental income;
  • income from sources outside the country
  • pensions as well as payments for child support.

Reimbursement for Private Health Insurance

Since the amount of the rebate for which you are eligible is determined by your income, the level of the refund that you receive as a couple may be different from the level that you received when you were filing as an individual. On this page, you can check the rebate rates and income thresholds.

Surcharge on the Medicare Levy

A Medicare levy surcharge is added to the monthly premiums of high-income individuals who do not have private patient hospital coverage.

If you are married, the Australian Taxation Office will calculate your Medicare levy surcharge based on both of your combined incomes. In addition to the Medicare Levy, it is computed as a percentage of your income (up to 1.5 percent), and payments must be made to the government.

If you do not have private patient hospital cover and your income is over the following thresholds, you may be required to pay the Medicare levy premium.

  • $90,000 for singles;
  • $180,000 for families.

Be sure to examine whether your combined salary puts you above the income level if you recently gained a spouse for tax purposes and you do not have private patient hospital cover. This is especially important if you recently got married. If you have private patient hospital cover, you won’t have to pay the additional fee, and you’ll be protected in the event of a medical emergency.

Medicare Levy Reduction

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Low-income earners are eligible for a decrease in the Medicare fee, which is another benefit. Therefore, if you have a spouse and your taxable family income is either equal to or less than $48,092 a year, you may be eligible for a reduction in your tax liability.

Are You Merging Your Houses?

When one spouse moves in with the other, the potential impact on the capital gains tax (CGT) exemption on the primary house is a factor that is sometimes neglected to be considered. For instance, if you and your partner each owned and resided in your own homes prior to moving in together, or if you were in a committed relationship but lived apart during the course of the year, and you intend to sell either one or both of the properties, there may be capital gains tax implications. When you are completing your tax return, you should seek the guidance of a tax professional because determining your CGT duties might be difficult.

If you are still unsure about whether or not you are required to submit your spouse’s information on your tax return, you should consult with a tax adviser or the ATO for guidance. If you fail to include your spouse on your tax return, the Australian Taxation Office (ATO) may seek to alter it, and you may potentially face monetary fines.

The Financial Impact of Marriage on Couples in Australia With Regard to Taxes

The arrival of spring signals the start of “wedding season,” when many people get married. Across Australia, hundreds of couples will be looking forward to their upcoming weddings, but there is a good probability that very few of them will have given any attention to the very major tax repercussions that could result from their new married status.

The good news is that all of the laborious tasks have been completed by us. This is a comprehensive guide to everything you need to know about the tax implications of getting married.

The Most Fundamental Financial Consequences of Getting Married

  • If you are married, you are exempt from the requirement that you file a joint tax return (as happens in some other countries). Instead, the income earned jointly is reported individually on the tax returns of each partner.
  • On your annual tax return, you are required to indicate that you now have a spouse and to report the amount of taxable income the spouse earns.
  • When determining Family Assistance Office benefits such as family tax benefits, your combined income is taken into consideration. This is also the case if you do not have private health insurance (in this case, you may be required to pay the Medicare levy surcharge, which is equivalent to an additional 1.5 percent tax if you are a high earning couple), and if you do not have private health insurance.
  • If you decide to go through with changing your name, your information will need to be corrected before you can submit your tax return. Online and over the phone are the two most convenient ways to accomplish the task. You will need documents like as your birth certificate or marriage certificate in order to establish your identification with the ATO when you do this. If you do not have these documents, you will not be able to proceed. As was previously the case, you will not be able to tell the tax office by merely making a note of it on the front cover of your subsequent return.

Do Wedding Gifts Qualify for a Tax Deduction?

They are eligible for a tax deduction for the gift as long as it is given to a charity that is registered as a Deductible Gift Recipient, which is the case if your guests decide to give money to a charitable organization of your choice at a wedding gift. Learn more about the recipients of deductible gifts here.

Combining Two Houses into One Big House? Watch Out For The Tax On Capital Gains

It is not unheard of for both individuals in a couple to have previously owned their own homes prior to being married. In most cases, you won’t have to pay capital gains tax when you sell your primary house. For the purposes of the capital gains tax (CGT), however, married couples are only permitted to claim a single principal residence exemption between them. If both partners in a couple own a primary residence, then one of the following must take place:

  • Choose one home to use for the exemption;
  • divide up the capital gains tax exemption (CGT) between the two homes.

The capital gains tax will not apply to either of the residences during the time period prior to the pair being classified as spouses if the homes qualify for the main residence exemption, which means they will both be tax-free. Nevertheless, once the couple gets married, they are only allowed to have one exemption between them, although this can be split between their two homes if they so choose.

Example:

In 2004, Susan made the purchase of a home. She called it home up until the year 2021, when she tied the knot with Roger, after which she and her new husband made the move into the house that Roger had owned since 2010. Because of the CGT, they decided to make Roger’s house their primary abode. If Mary decides to sell her home, she will be required to pay capital gains tax (CGT) on any increase in the value of her home beginning in 2021. However, she will not be required to pay CGT on any growth in the capital during the time period before she married Roger.

Susan does, however, have access to a lot of other options to choose from. To begin, it is highly recommended that you check with your personal tax professional regarding the repercussions of capital gains.

Taxation Of Same-Sex Couples

The concept of “spouse” has been broadened so that it now encompasses both de facto and registered relationships in addition to the traditional meaning. Your “spouse” is another individual, whether they are of the same or opposite sex, who satisfies the following criteria:

  • is registered under the laws of a state or territory because they have a relationship with you and comply with those laws;
  • despite the fact that you are not legally married to each other, this person lives with you as a genuine domestic partner in the context of your relationship as a couple.

This means that people who live together within the same sexual orientation are now subject to the same tax regulations as couples who are of different sexual orientations. They are now subject to identical regulations in areas such as these:

  • a decrease in or exemption from the Medicare levy;
  • a supplemental levy for Medicare;
  • primary residence exemption for capital gains tax.

Should I Include the Income of My Spouse or Partner on My Tax Return?

You already know what this means: it’s time to round up all of your tattered and wrinkled receipts and stare at your tax return with a frown for so long that you end up with a headache.

One question, in particular, seems to throw off the answers of a good number of younger people in Australia, and that question is “Did you have a spouse during [the financial year]?“.

I mean, what precisely do we mean when we say “spouse”? Why does it seem like your relationship status is such a big deal to the Australian Tax Office (ATO)? And how exactly will reveal your partner’s income influence the tax return that you file for yourself?

What exactly does “spouse” mean according to the ATO?

The official description, as provided by the ATO, is as follows:

“Another individual (of either sex) who meets the following criteria is considered to be your spouse:

  • you were involved in a relationship with someone who was required to be registered under the laws of a state or territory;
  • despite the fact that they were not married to you officially, they lived with you in a true domestic relationship as a couple while they were together.”

To summarize, to quote the ATO: “In the context of the tax code, a spouse is more than merely a husband or wife. It also includes a partner with whom you share living arrangements.”

It makes no difference if you choose not to discuss your financial situation. You are required to acknowledge your connection, though, if you are cohabitating with someone and sharing a residence.

This also includes a relatively new partner who you’ve lived with for a short amount of time (for example, a few months of isolated together during COVID lockdowns), as well as a partner that you have previously lived with (e.g. you broke up at some point in the financial year).

You are required to include the beginning and ending dates of the relationship on your tax return.

Which Pieces of Information do You Require From Your Partner?

After you have responded “yes” to the first question, you will be required to provide more information about your spouse, including their name, date of birth, gender, and income.

The ATO would appreciate as much information as you can provide regarding this final point, including what they earned, how much they paid in superannuation, whether or not they experienced any losses in their investments or property, and so on. It is not the end of the world, however, even if you are unable to gain access to all of it.

If you find yourself in a situation in which you simply cannot obtain such information, you should make sure you have a decent estimate. In addition, if you are at a loss for what steps to take, you always have the option of seeking guidance.

This recommendation can come from an accountant or even directly from the ATO. You can utilize the live chat feature on the ATO website, or you can phone the hotline at the number 13 28 61.

The good news is that you won’t be required to go after your horrible ex in order to obtain information about their superhero contributions.

As long as you acted fairly and it was done in good faith, the ATO will not penalize you for an inaccurate estimate even if it was submitted by you.

Is This A Joint Tax Return?

No. It is not a joint return.

You and your spouse will each be responsible for paying income tax based on the money that you make. Your spouse will pay income tax on the income that they earn.

Do not let the fact that your partner makes more money than you stress you out. You are not going to be accountable for paying the bill that they have racked up.

So… What’s It For Then?

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The individual is the unit of taxation under Australia’s system. It does not put a financial burden on the family unit. Despite this fact, it does acknowledge certain aspects of the family [in other respects].

The ATO will consider the income of your spouse when deciding whether or not:

  • Because you have private health insurance, you are eligible to receive a rebate;
  • You are eligible for a reduction in your Medicare tax contribution;
  • You are eligible to receive a tax credit for elderly citizens and pensioners;
  • You are required to pay the additional Medicare levy.

What Does That Imply Regarding Your Money?

Given the diversity of people’s circumstances, it is difficult to provide a definitive answer to the question of what influence all of this has. It is always in your best interest to consult an impartial and experienced specialist regarding your own predicament.

Declaring your partner’s income, on the other hand, is “not automatically a negative thing,” as the expression goes.

It is possible that this will result in a somewhat increased tax requirement on your part, either in the form of the Medicare levy or the Medicare levy surcharge; nevertheless, it is also possible that the Medicare levy surcharge will be reduced.

It is highly dependent on factors like as one’s degree of income, whether they have access to private health insurance and their overall personal circumstances.

There is, however, one illustration that shows how things might turn out:

Let’s say one person had an annual income of $100,000, while their partner had an income of $50,000. Because the individual threshold is $90,000, that person is going to be personally responsible for paying the Medicare levy surcharge. [Because the individual threshold is $90,000]

Having said that, taking into consideration the combined income of $150,000, this is actually below the family level (which is $180,000). That means you won’t be responsible for paying the fee that, as an individual, you would have been required to pay.

In circumstances such as these, failing to disclose the income of your partner can be analogous to “leaving cash at the door.”

What Are the Consequences of Failing to Report the Income of Your Partner?

The most important thing is that you shouldn’t just put nothing. You can’t just brush it off.

The ATO has access to a vast amount of information. Therefore, it is possible that the submission you have made may be modified at a later time, and you may run into difficulties as a result of the information that you have left out.

If you make a statement on your tax return that is incorrect or misleading, you could face a variety of penalties; however, the ATO is here to assist you.

In the event that individuals have inquiries, ATO is more than ready to respond to them. If you discovered an error, all you need to do is make sure you edit or amend it with the ATO.

What Occurs If You and Your Partner Never Discuss Financial Matters Together?

If you and your partner keep your finances separate from one another, discussing your total income could be an awkward proposition for you. Will they consider it to be too little? Are you sure? Will there be more tensions as a result of this?

In most cases, it’s beneficial to have a conversation regarding financial matters. However, you do not have to jump right into the numbers and start analyzing them. If you’re feeling anxious about taking that first step, the following are some discussion openers you might use.

If you are concerned about being criticized because of your low income, it is important to keep in mind that having more money does not make one more deserving of love or admiration.

Keeping up these dialogues beyond the tax season can also be beneficial to everyone involved.

Are there any obligations that you ought to be aware of? What kinds of monetary objectives do the two of you want to accomplish? If you and your partner decide to share finances in the future, does your partner have any expectations?

It’s possible that these will be challenging conversations. People frequently have a variety of complicated feelings around monetary matters, and it’s not always simple to talk about them. However, asking a few questions with the purpose to learn more is a fantastic way to get started.

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