Tax Benefits from Marriage?

I've heard from some Americans who claim that marriage gives you a tax advantage somehow.

Does Australian law give married couples tax advantages? If so, what are these advantages?

 

theres tax benefits if its a same sex couple.... they get two PPORs as its not recognised as a defecto relationship...

the only tax benefit i can think of is potentially the medicare levy threshold. It changes from 50k per person to 100k per couple. So if you have mum as a stay at home and dad earns 90k he would be exempt from the additional 1% levy (he would still be liable to the 1.5%)...

 

Marriage or defacto relationships (hetero) have some significant tax disadvantages:

Loss of one main residence exemption

Payments to associates being limited (Div 26, PSI, Div 7A)

Loss of some centrelink benefits (inc. FTB)

But also some advantages:

Spouse super contribution

You are a deemed dependant for estate planning purposes - e.g. property & super

Also for Medical Expense Rebate & Medicare Levy thresholds

It is a complex area and what may be good for one "couple" may not be good for another.

Its a sorry society that has to consider tax & benefits before establishing relationships !!!

Cheers,

Rob

 

"Joint Tennants" may be able to achieve the same thing.

 

Hard to be joint tenants of a superannuation balance ...

A dependant can demand fair consideration in a will.

Also super death benefits received can be tax free, and need not have to pass through the deceased estate where it is able to be challenged more easily.

Cheers,

Rob

 

Hi,

Tax-free to a spouse or financial dependent.

Binding beneficiary nominations instruct the trustee to pay direct to the beneficiary (which are valid for 3 years), non-binding nominations can be slow to pay as all relevant parties are contacted and information goes back and forth and eventually the trustee will pay somebody (not necessarily who you nominated in the percentage that you wanted).

The more family members you have (especially blended families or step-families), the more potential beneficiaries whose situation have to be taken into account by the superannuation trustees.

Dan

PS Before making an estate planning decision, speak to your lawyer, solictor or estate planning specialist.

 

If a couple (who are initially not defacto or married) both own their own home at the time they get married, one of them moves in with the other, then shortly after they were to sell the second property, how is capital gains calculated on the sold property?

What if they were to rent the second property out for a few years and then sell?

What if they sold the second property before they got married, would that be a better option?

 

Firstly ... don't do anything just because you don't want to pay tax.

Why do you have to sell one of your assets ?

Once you are in a domestic relationship, you effectively lose one main residence exemption FROM THAT DATE ONWARDS. Its not quite that simple, but that is the general idea.

This means that you don't have to sell today to avoid a large tax bill that suddenly appears on marriage as it is not retrospective.

e.g. owned a main residence 4 years, then marry & live in spouse's main residence for 1 year before selling original vacant residence. Then you will only count 1/5 of the capital gains, and don't forget the 50% discount = 1/10 of the gains go in your assessable income.

OR you could rent out the vacant residence, in which case the cost base will be the market value on that day, and only gains from that day effectively are subject to CGT (with 50% discount).

Don't forget joint ownership from the date you lose the exemption enables you to split future capital gains (and any rental income).

Check out the ATO website for useful info on CGT for individuals.

These are issues to talk to an Accountant and Financial Planner about, especially if considering renting and other options for using that equity for investment.

Cheers,

Rob

 

I can see a cartoon now, one of the characters saying to the other "No I won't marry you because I will have to pay tax"

When you get married you may want to consolidate your portfolios into one, selling may be a good idea if you would like to rebalance your allocations, or reassess your risk or timeframes to match your new goals together.

That sounds fair, but sounds a bit complicated too. You really do need to see a planner so you know to do things like getting a valuation around the wedding date (I never would have thought of that).

 

Just don't fall in love with the idea of selling until you have crunched the numbers.

You will have reduced outgoings due to shared living expenses, and extra income if you rent out one property (especially if transferring rental property mortgage to interest-only).

Then you can diversify by using this income to acquire different types of securities.

All this can be done without having to aggressively increase borrowings if you don't feel comfortable in the current climate.

Alternatively (or additionally) pay down debt faster with your increased disposable income, usually the first choice is paying down non-deductible loans.

Do a search of the site on debt recycling etc. to give you a bit of background info before going to see your Advisor. That way you will understand more at the actual time of your first interview, and get to ask some intelligent questions that usually only occur to you much later (when you are paying for their time !).

Cheers,

Rob

(Of course this is only a general opinion, the value being equal to what you have just paid for it)

 

Personally I also think it's a sorry society where being married or in a defacto relationship has any affect at all.

IMHO there should be no spouse super contribution, no shared medicare levy.

 

The original question

Getting back to the original question, the reason Americans would have commented that there can be tax advantages in being married, are that in the US you can lodge a "joint" tax return, where your combined income is used to determine the amount of tax payable.

This can result in a better outcome than lodging of two individual returns.

No such luch in Australia, the rules don't exist.

But as many have pointed out, there are other differences in tax rules in Australia that can be affected to single vs couple.

 

I always believed Australian taxation policy that disadvantages families and increases family financial burden is one of major contributors related to the high divorce rate in Australia.