How Couples Maximise Their Tax Benefit
Managing your taxes as a couple opens up several opportunities to optimise deductions, access tax offsets, and reduce your overall tax liability. By working together on your financial strategy, you can maximise your tax benefits. Below are key strategies to help couples make the most of their taxes:
1. Claiming Spouse Contributions
If one partner earns a low income or is not working, the higher-earning partner can make superannuation contributions to the other’s fund and claim a tax offset of up to $540. To qualify, the receiving spouse’s income must be less than $37,000, and the contributing partner must not exceed a $3,000 contribution.
This strategy helps increase the super balance of the lower-earning partner while reducing the contributing partner’s taxable income. It’s an excellent way to secure future financial stability while benefiting in the present.
2. Income Splitting
Income splitting involves distributing income-producing assets, such as investments or rental properties, between the partners. The goal is to shift income to the partner in the lower tax bracket, reducing the couple’s overall tax bill.
For example, if one partner is in a higher tax bracket, they can transfer assets to the lower-income partner, who would then pay a lower rate on the income generated. This strategy can be particularly useful when one partner has taken time off work or is earning less due to part-time employment or other reasons.
3. Joint Investments for Shared Deductions
Couples can benefit by jointly investing in assets, such as rental properties, shares, or managed funds. The income and any tax-deductible expenses, such as maintenance costs for rental properties, are split between both partners. This means each partner can claim a proportion of the deductions, potentially lowering their taxable income.
4. Home Office Deductions
If both partners work from home, either full-time or part-time, each can claim a portion of home office expenses like utilities, internet, or office furniture. The Australian Tax Office (ATO) allows couples to apportion these costs based on usage, so make sure both partners keep detailed records of the time spent working from home.
This can result in a significant reduction in taxable income, especially if both partners are working remotely for extended periods.
5. Family Tax Benefits
For couples with children, Family Tax Benefit (FTB) payments can be a significant support. There are two parts to FTB:
- FTB Part A: Helps with the cost of raising children and is available for families with dependent children.
- FTB Part B: Supports single-income families, particularly where one partner stays at home or earns a low income.
Maximising FTB can help lower your taxable income and provide extra financial relief.
6. Superannuation Co-Contributions and Spouse Contributions
If either spouse earns under $58,445, they may qualify for the Government Co-Contribution Scheme, where the government adds to your superannuation when you make personal contributions.
Alternatively, if one partner earns under $40,000, the higher-earning spouse can contribute to their super account and benefit from the Spouse Contribution Tax Offset. These contributions not only help reduce tax but also grow your retirement savings.
7. Medical Expenses Offset
Couples can claim a tax offset for out-of-pocket medical expenses over a certain threshold. This includes expenses for disability aids, attendant care, and aged care.
By pooling your medical expenses, couples can take advantage of these deductions, potentially lowering your combined taxable income. Be sure to keep all medical expense receipts to qualify for this offset.
8. Reviewing Your Tax Returns Regularly
Regularly reviewing your tax strategy ensures you’re taking full advantage of any changes in tax laws, deductions, or offsets. For example, if you’ve recently become parents or one partner’s income has changed, you may qualify for additional benefits.
It's important to work with a tax professional to identify areas where you can optimise your tax returns and avoid any mistakes that could lead to penalties.
To make the most of these strategies, consult a tax agent who can guide you through the process and help ensure you’re maximising every tax benefit available as a couple. A professional can tailor the advice to your specific situation, saving you time and money.
Need help navigating your tax as a couple? Contact Tax Accounting Adelaide today for personalised tax planning that helps you maximise your tax benefits and grow your financial future together. Book a consultation now!
