Ways to Maximise Tax Return with a De Facto Partner?

Bronica on 08/07/2019 - 19:51

My partner has been living with me at my parents place for the past 4-5 years, and i only started working full-time in the last 3 while she has been studying the entire time. We've only just realised there may be certain tax benefits if we declared ourselves de facto as she doesn't work, but we halve the income I get that she uses to support herself while studying.

Due to this, is there a way that i can put down in tax returns that she gets half of my income and i can get that half tax exempt? I can't seem to find this as an option in the return. How would she also declare this on her return?

Are there also any other tax tips that we can also do as a de facto relationship?

Financial

Comments

  • AustriaBargain on 08/07/2019 - 20:01
    +1

    What if you start a home business and pay her half your income.

    • Bronica on 08/07/2019 - 20:03
      -1

      As a business expense you mean?

      I was more so thinking along the lines of couples that have stay at home mothers with only 1 income and following the way how they file taxes as this is a similar situation.

      • p1 ama on 09/07/2019 - 00:39
        +1

        I was more so thinking along the lines of couples that have stay at home mothers with only 1 income and following the way how they file taxes as this is a similar situation.

        They would file taxes in exactly the same way that you file taxes. The fact that they're married to someone who is "stay at home", or someone who earns over $1m p.a. is irrelevant to the amount of tax they pay.

        The only difference is the amount the threshold for MLS, but that's a very minor point anyway.

    • Blue Cat on 08/07/2019 - 20:26

      She will have to pay income tax, which (in majority cases) means he will be actually wasting money on tax.
      Unless you pay her $18200 per year.

      • AustriaBargain on 08/07/2019 - 22:28

        Even 19 cents on the dollar could be better than what he is paying on the last 15k he earned, for all we know.

  • chumlee on 08/07/2019 - 20:05
    +7

    No such tax incentive exists that's why you can't find any info on it

    • Bronica on 08/07/2019 - 20:06

      Thanks. Answered my question.

  • toniyellow on 08/07/2019 - 20:14
    +1

    If she is living with you, even if not legally married, if you are 'living on a genuine domestic basis in a relationship as a couple', you don't get to choose if you are defacto or not you already meet the ATO definition for defacto.

    https://www.ato.gov.au/Individuals/Tax-return/2019/Tax-retur…

    If you choose to select no to this question, you are lying on your tax return. Whether or not they catch you at it or would bother to do more than give you a warning is another thing.

  • toristo on 08/07/2019 - 21:27

    The best tax bargain I have found is paying a good accountant. Their cost is tax deductible the next year, and, they'll legally get you every cent you're entitled to because they'll ask you 1000 questions to uncover what works best for your financial situation.

    • tio on 08/07/2019 - 22:19

      ditto. Best to see an accountant. But here my 2c. If your income comes in as salary (ie you are an employee, not a sole trader with an abn), then there's not much you can do. There are a few things that you can claim from your spouse expenses on your tax return (like private health rebate, non-concessional super contribution etc.). Plus, did she receive any payment from the centrelink last financial year your plan may complicate those centrelink payments.

    • p1 ama on 09/07/2019 - 00:31
      +1

      I disagree - if you have a business, then yes, but if you're a salaried employee in a pretty standard industry then everything's pretty cut and dry when it comes time to do your tax returns if you've done your due diligence and you know the deductions you're allowed to claim. If you don't, it's not hard to read up and learn. I'm a salaried employee, have very, very few deductions (maybe a computer at most) and my tax return is done in a few minutes.

      • ThithLord on 09/07/2019 - 08:21

        I'm in the same boat - my tax return took less than five minutes, to be honest.

  • p1 ama on 09/07/2019 - 00:36

    Due to this, is there a way that i can put down in tax returns that she gets half of my income and i can get that half tax exempt? I can't seem to find this as an option in the return.

    Why would you think that you can do this?

    Just think about the ramifications of this for a second, can you imagine the level of fraudulent marriages if we had this sort of rule? E.g. single person earning $200k "marries" an unemployed person and they split the tax benefits.

    • Some Guy on 09/07/2019 - 00:57

      Income splitting is not uncommon.

      • Eeples on 09/07/2019 - 01:58
        -1

        Really?
        In Australia?
        Maybe for self employed….

        • Some Guy on 09/07/2019 - 17:21

          Yes, yes and yes, particularly among the self employed or those employed in small businesses.

          • p1 ama on 09/07/2019 - 17:36
            +1

            @Some Guy:

            particularly among the self employed or those employed in small businesses

            I wouldn't say particularly, I'd say "only". If you're salaried, there's basically no way you can "split" income in this manner barring some very dodgy/illegal and obviously fraudulent means that will raise alarm bells at the ATO almost instantly (e.g. setting up a business just so you can pay someone else).

            Having been involved in several small businesses in my younger days (mostly consulting and strategy, not management), I'd say this would be the only real option to do something like this. With so little oversight, you can almost do anything with a small business. One that I worked with paid someone else for "goods and services" which reduced their NOI and hence, tax. The guy who got paid would take a commission and pay the amount back to the owner.

            • Some Guy on 15/07/2019 - 16:52

              @p1 ama: I'm not self-employed or in a small business (more than 200 staff) - see below.

              Your example is well dodgy and risky but pretty pointless for so little, but I suppose the difference between the tax payable and the commission is large enough….especially if there's a few guys getting paid for nothing.

          • Eeples on 11/07/2019 - 23:57

            @Some Guy: Okay, so not common.

            Good grief.

            Lol@neg

            • Some Guy on 15/07/2019 - 16:47

              @Eeples: I didn't neg you dude. Your questions were more than reasonable and we're just chatting.

              I know a couple of people that do it, including me. The company I work has agreed to pay my wife for expenses relating to a home office. She wasn't working when the arrangement was put in place so it was useful, and there's nothing illegal about it according to my accountant. If it was paid to me it would be considered as income to me. Now she's working it makes little difference really - her tax bracket vs mine on a pretty small amount isn't going to allow us to retire early.

    • Australianjim on 09/07/2019 - 09:56

      My very limited understanding is that such practice was significantly more prevalent and often done via a trust but within the last 5ish years the ATO changed the roles and cracked down on it. Similar to income distributing to a child via a trust for tax which has also become a closed loophole.

      • p1 ama on 09/07/2019 - 17:38

        Yes, basically impossible now for salaried employees. ATO is too sharp. Not that long ago, you could get away with much more because they had to manually check.

    • Easton on 09/07/2019 - 15:29

      In the US, you can file taxes jointly with your spouse.

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