Marriage and Taxes: Tax Implications for Couples in Australia

If you are getting married, here's what it means for your taxes

Spring is upon us and that means "wedding season" is with us too. Across Australia, thousands of couples will be looking forward to their forthcoming nuptials and the chances are few of them will have given any thought to the potentially important tax consequences of their new married status.

The good news is we've done the hard work. Here's our guide to all you need to know about marriage and tax.

 

Getting married: the basic tax implications:

• 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 hospital insurance (you may have to pay the medicare levy surcharge –effectively an additional 1% to 1.5% 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.

Tax deductible wedding gifts? Show me how

If your guests choose to make gifts to a charity of your choice as a wedding gift, they can claim a tax deduction for the gift provided it's to a charity registered as a Deductible Gift Recipient. Read more about deductible gift recipients.
 

Merging two homes into one? Look out for 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.

The decision as to which house will be classed as the main residence after the they are married does not need to be made until one of the residences is sold.

Example:
Susan bought a house in 2004. She lived in it until she married Roger in 2021 at which point they moved into his house, which he had owned since 2010. Susan commenced renting her house at that time. Roger's house became their main residence for CGT purposes. If she chooses to sell her house, Susan will be subject to CGT on her house for any growth in value from 2021 but she will not have to pay CGT on any capital growth in the period before she married Roger.

However, there are a number of alternatives available to Susan and Roger. It is advisable to obtain advice from you H&R Block tax consultant on the capital gains implications.
 

Same sex couples and tax

The definition of spouse has been extended so that both de facto relationships and registered relationships are now recognised. Your 'spouse' is another person (whether of the same sex or opposite sex) who:

• is in a relationship with you and 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.

That means that people living in same-sex relationships are now treated in the same way as heterosexual couples for tax purposes. They now fall under the same rules in areas such as these:

• Medicare levy reduction or exemption
• Medicare levy surcharge
• main residence exemption for capital gains tax