De-Facto Tax Australia – All You Need to Know

1. De-Facto Tax Australia – All You Need to Know Safe & Secure In Australia, a de facto relationship is defined as a couple living together on a genuine domestic basis in a relationship, without being legally married or in a registered relationship. If you are in a de facto relationship, you must declare your partner on your de-facto tax return. www.taxly.ai

2. Tax Obligations for De Facto Couples As a de facto couple, your income is assessed jointly and referred to as “family income” This means that you still lodge a personal tax return each year, but you include your partner’s income on it as well. The Australian Taxation Office (ATO) uses your joint income to calculate tax offsets you may be entitled to receive. www.taxly.ai

3. Partner’s Financial Details Required for De-Facto Tax You’ll need to report various financial details about your partner, such as: • Taxable Income • Trust Distributions • Reportable Fringe Benefits • Pensions and Allowances • Reportable Super Contributions • Foreign Income www.taxly.ai

4. Implications of De Facto Tax Changes Tax changes in a de facto relationship can have both positive and negative impacts: Medicare Levy Surcharge: If your ‘family income’ crosses the Medicare Levy Surcharge threshold, you may need to pay the surcharge. For instance, if your income is $190,000 and your partner’s is $20,000, the combined ‘family income’ triggers the surcharge [1]. Private Health Cover Rebate: If your family income falls within a specific range and you have private health cover, you may be eligible for a rebate, which can be applied as a premium discount or claimed on your tax return. Tax Refund: Conversely, if your ‘family income’ remains below certain limits, you may receive a higher tax refund. Consider this example: if your joint income is $150,000, you might benefit from a larger refund. www.taxly.ai

5. De-Facto Tax and Property Ownership If both partners own properties, you need to consider Capital Gains Tax (CGT). CGT is a levy on the increase in property value between purchase and sale dates. Determine your Main Residence: Decide which property serves as the main residence, eligible for CGT exemptions. For instance, if both partners own homes, you can choose one as the primary residence for tax purposes. De-Facto Tax CGT Exemption Requirements: To be eligible for a CGT exemption, the property should meet specific criteria. It must have been your primary residence during the ownership period It must not used for income generation It should be situated on less than two hectares of land. www.taxly.ai

6. The Bottomline De facto tax in Australia is applicable on de facto relationships. You must declare your partner on your tax return, and your income is assessed jointly as “family income”. The Australian Taxation Office (ATO) uses your joint income to calculate tax offsets you may be entitled to receive. www.taxly.ai

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