Do I have to declare my partner’s income on my tax return?

It’s tax time!

You know what that means: it’s time to collect all your faded and crumpled receipts and frown at your tax return for so long that you have a headache.

For many young Australians, there is one question in particular that seems to be confusing: “Have you had a spouse for [the financial year]? “

I mean, what exactly is a “spouse”? Why does the Australian Tax Office (ATO) care so much about the status of your relationship? And how can your partner’s tax return affect your tax return?

We went to the experts to get answers.

How does the ATO define “spouse”?

Here is the official description of the ATO:

“Your spouse includes another person (of any gender) who:

  • you were in a relationship with that was registered under a prescribed state or territory law [or]
  • although not legally married to you, has lived with you on an actual domestic basis in a couple relationship “

Basically, as ATO Deputy Commissioner Tim Loh says: “In fiscal terms, a spouse is not just a husband or wife. This also includes [a partner] you live with it. “

It doesn’t matter if you don’t share your finances. If you are in a relationship and you live under the same roof, you must declare it.

Dr Elizabeth Morton, tax lecturer at RMIT, notes that this also includes a relatively new partner with whom you have lived for a short time (e.g. a few months of isolation together during COVID lockdowns) or a partner with whom you have been living for a short time. have lived (for example, you broke up at some point during the exercise).

“In your tax return, you would list the start and end date of the relationship,” she says.

What information do you need from your partner?

Once you have checked “yes” on this first question, you will also need to include your spouse’s name, date of birth, gender and income.

The ATO would like to have as much information as possible on this last point: what they gained, what they paid in super, the losses they suffered in investments or goods, etc. But if you can’t access it all, it’s not the end of the world.

“If you’re in a position where you just can’t get this information, make sure you have a reasonable estimate,” Ms. Morton said. “And you can always ask for advice if you don’t know what to do.”

This advice could come from an accountant or from the ATO itself. You can call the helpline on 13 28 61 or use the live chat on the ATO website.

The good news: no one is going to force you to chase down your terrible ex for information about their super contributions.

“We don’t penalize anyone for an incorrect estimate – as long as you’ve acted reasonably and in good faith,” Loh said.

Is this a joint tax return?

Nope! “It’s not a joint tax return at all,” Loh said.

Translation: don’t stress if your partner earns more than you. You are not going to be responsible for paying their bill.

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So… what’s the point then?

“The Australian tax system taxes the individual,” says Ms. Morton. “It does not tax the family unit. Although it does recognize elements of the family [in other ways]. “

The ATO uses your spouse’s income to determine whether:

  • you are entitled to reimbursement for your private health insurance;
  • you are entitled to the tax reduction for seniors and retirees;
  • you are entitled to a reduction in the Medicare levy; or
  • you have to pay a medicare surcharge.

What does this mean for your $$$?

It’s hard to say exactly what effect all of this has because everyone’s situation is so different. You should always seek independent professional advice for your personal situation.

But, generally speaking, Morton says that reporting your partner’s income is “not automatically a bad thing.”

“It could mean a slightly higher tax liability – whether it’s through the Medicare tax or the Medicare surtax OR you could actually see a reduction in the Medicare surtax,” she says.

“It really depends on the level of income, private health coverage and the general personal circumstances of each person.”

She does, however, give an example of how this might work:

“Let’s say a person was making $ 100,000 a year and their partner was making $ 50,000. Individually, that person will be responsible for the Medicare surcharge. [because the individual threshold is $90,000].

“However, if you consider the combined income of $ 150,000, it is actually below the family threshold. [of $180,000]. This means that you will not pay this surcharge that you should have paid as an individual. “

Mr. Loh says that in situations like this, not reporting your partner’s income can be like “money left at the door.”

What happens if you don’t report your partner’s income?

“The most important thing is: don’t put anything in,” Ms. Morton says. “Don’t ignore it.

“The ATO has access to a lot of data. You might find that the submission you made might be changed later and you might run into problems because you omitted information.”

There are variant penalties for making a false or misleading statement on your tax return, but Mr. Loh says “the ATO is here to help”.

“If people have any questions, we’re more than happy to answer them… And look, if you’ve made a mistake, just be sure to review or modify it with us.”

What if you and your partner never talked about money?

If you and your partner have separate finances, revealing your full income can be an uncomfortable prospect. Do they think it’s too low? Too high? Will this create tension in the relationship?

Generally speaking, it is healthy to talk about money. But you don’t have to dive right into the numbers. Here are some conversation starters if you’re nervous about taking that first step.

And if you’re worried about being judged for low income, remember that having more money doesn’t make you more worthy or kinder.

It may also be helpful to continue these conversations beyond tax season.

Are there any debts you should know about? What financial goals are you both aiming for? Does your partner have any expectations regarding shared finances in the future?

These conversations could be difficult. People often have complicated feelings about money, and it’s not always easy to share. But asking a few questions with good intentions is a great first step.

This article contains general information only. You should obtain specific, independent professional advice regarding your particular situation and problems.

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