Yahoo Finance Tax consequences if you're about to get married
There are issues that can pop up down the line if you haven't dotted all the I's and crossed all the T's.
Getting married involves organising a thousand things and the chances are that amongst all the obvious things, you’ve given no thought whatsoever to the impact getting married will have on your taxes or the things you’ll need to be aware of once you’ve tied the knot.
With that in mind, if you're preparing to walk down the aisle, here is a run-down of all the key things you need to know about marriage and tax.
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 spouse’s tax return.
You do 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 tax of up to 1.5 per cent - if you are a high-earning couple and one or both of you does not have a qualifying private health policy) as well as when calculating some 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 (check here to find out).
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Merging two homes into one? Look out for capital gains tax!
It is not unusual for each half of a couple to own their own home before they marry. Normally, you can sell your main residence without capital gains tax (CGT). However, spouses are only entitled to one main residence exemption for CGT purposes between them. If both members of a couple 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.
Example
Susan bought a house in 2004. She lived in it until she married Roger in 2020 at which point they moved into his house, which he had owned since 2010. 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 2020 but she will not have to pay CGT on any capital growth in the period before she married Roger.
Same-Sex Couples
The definition of spouse includes both de facto relationships and registered relationships. 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
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