Tax Return Basics: Should You Declare Your Spouse’s Income?

Relationships come in all shapes and sizes—whether you’re married, in a de facto partnership or happily DINKs (dual income, no kids). While love and tax don’t seem like the most romantic pair, the Australian Taxation Office (ATO) views all relationships equally. So, yes, even your relationship might involve a little tax business, especially when it comes to declaring your spouse’s income on your tax return.

Confused? Don’t worry—you're not alone. Let’s clear up the mystery behind why you need to declare your spouse’s income. After all, mystery should be reserved for date nights, not tax time! Here’s what you need to know, starting with the question our tax accountants hear most often.

Do I Have to Pay Tax on My Spouse’s Income?

Nope, not at all! Each person pays their own income tax based on what they earn. Declaring your spouse’s income doesn’t mean you’ll have to pay extra tax. So why does the ATO even care about your spouse’s income?

Why Do I Need to Declare My Spouse’s Income?

The ATO asks for your spouse’s income to determine your eligibility for certain benefits or rebates, which could actually save you money. Some examples include:

• A private health insurance rebate
• The seniors and pensioner tax offset
• A reduction or exemption from the Medicare Levy Surcharge (MLS)

Let’s break these down a little further.

What is the Private Health Insurance Rebate?

If you have private health insurance, you might be eligible for a rebate on the premiums you paid. This rebate is means-tested, which means it’s based on your income. For couples, your combined income is used to calculate the rebate. You can claim this rebate directly through your insurer or when you lodge your tax return.

What is the Medicare Levy Surcharge (MLS)?

The Medicare Levy Surcharge is an extra charge that applies if:

• You and/or your spouse (plus any dependent children) don’t have private hospital cover, and
• Your combined income is above a certain threshold.

For high-income earners without private health insurance, the MLS can add up quickly. It’s an additional percentage of your income (up to 1.5%) on top of the regular Medicare Levy.

For the 2023/24 tax year, the income threshold is $93,000 for singles and $186,000 for couples. If you have more than two kids, the threshold increases by $1,500 for each additional child (after the first one).

Pro Tax Tip: If you’re a new couple, it’s worth checking your combined income. If you’re over the threshold, getting private health cover could save you from paying the MLS. Plus, it’s good peace of mind, even if you hope you never have to use it!

Who is Considered a “Spouse” for Tax Purposes?

For tax purposes, the ATO defines a spouse as:

• Someone you’re legally married to
• A person you’re in a registered relationship under state or territory law
• Someone you live with in a genuine domestic partnership (even if you’re not legally married)

This covers a wide range of relationships, including de facto couples. Your living situation and the nature of your relationship are key factors when the ATO decides whether you’re considered a “spouse.”

What Should I Declare About My Spouse’s Income?

The ATO doesn’t need every little detail about your spouse’s income, so don’t panic if you and your partner keep finances separate. An estimate will do just fine.

However, it’s a good idea to include the following when you make your estimate:

• Salary and wages
• Dividends
• Interest
• Rental income
• Foreign income
• Pensions or child support payments

Pro Tax Tip: If you’ve recently moved in together and are thinking about selling a property, keep in mind that you could face Capital Gains Tax (CGT). The rules can get tricky, so if you’re unsure about CGT, speak to a tax professional who can help you figure out what you owe and how to minimize it.

When Do I Need to Declare My Spouse’s Income?

You’ll need to declare your spouse’s income when you lodge your own tax return. As long as your spouse’s income details are marked as ‘tax ready,’ you’re good to go.

Declaring your spouse’s income might seem like an extra step, but it’s really about ensuring that you receive all the benefits and rebates you’re entitled to. If you’re unsure or need help, don’t hesitate to reach out to a tax professional. Tax time may not be romantic, but at least you’ll be working together!