There are many questions in the individual tax return that have nothing to do with your taxable income. For example, information about your occupation is used to form benchmarks which are then used to assist with review and audit selection.
Information in your tax return is shared by the Australian Taxation Office with other government departments and agencies. The most common are Centrelink and the Child Support Agency.
If you have a spouse and are living together, you are required to report their details in your tax return. It can be a big moment for young couples, to declare their relationship to the government for the first time.
What might be included
Following are some of the spouse information items requested:
- Name
- Date of birth/death
- Residency
- Relationship start/end date
- Taxable income
- Reportable fringe benefits
- Reportable superannuation
- Net investment losses
- Tax-free government pensions/benefits
There are more, but these are the main ones. The emphasised items form part of what is referred to as adjusted taxable income.
This can all seem a bit over the top. Why do they need to know? There are 2 main reasons spouse information can change the result of your income tax refund (or payment due).
Medicare Levy Surcharge
If you have or are eligible for a Medicare card, you will pay the basic Medicare Levy, which is currently 2% of your taxable income. This tax is included in tax withholdings calculated and paid by your employer.
If you don’t have private patient hospital cover AND the sum of you and your spouse’s adjusted taxable income is over $180,000 (plus $1,500 for each child after the first) you are also required to pay the Medicare Levy Surcharge (MLS).
This extra tax is not included in tax withholdings calculated by your employer. See the table below for surcharge rates and thresholds. Note that the single threshold is half that for a family or couple.
| Base tier | Tier 1 | Tier 2 | Tier 3 | |
|---|---|---|---|---|
| Income range | Up to $180,000 | $180,001 - $210,000 | $210,001 - $280,000 | Over $280,000 |
| Surcharge | 0% | 1% | 1.25% | 1.5% |
We commonly see situations where the surcharge will not be payable by simply reporting spouse details. This happens when together they are below the family threshold, but separately one partner exceeds the single threshold. The result is a saving of at least $900 (1% of $90,000) in tax.
Private Health Insurance Tax Offset
If you have combined health insurance with your partner, your health insurer will issue you with a tax statement showing how much you have paid in premiums for the year. It will also show how much of the government tax offset was deducted from your premiums. This information will be split or halved for each of you.
Like the surcharge above, the tax offset is now scaled based on combined adjusted taxable income.
Your insurer may have asked you to nominate a tier or income range so that they can correctly calculate the amount of the tax offset to deduct from your premiums. With the best of intentions, this does not always work out. Therefore, there is a reconciliation process included in your tax return.
The table below shows the tax offset amounts for each income tier. We are only showing the rates applicable to people aged under 65 years. There are higher rebate percentages for people over 65 and another increase for people over 70.
| Base tier | Tier 1 | Tier 2 | Tier 3 | |
|---|---|---|---|---|
| Single | $90,000 | $90,001 | $105,001 | $140,001 |
| Family or Couple | $180,000 | $180,001 | $210,001 | $280,001 |
| Under 65 years | 24.608% | 16.405% | 8.202% | 0% |
Again, reporting spouse income will ensure you are paying the correct amount of tax. Not reporting spouse income may mean that one partner is paying more than is required because the single income threshold is used to calculate the amount due rather than the family income threshold.
Disclaimer: Information is correct as of April 2022.