How life events affect tax

The ATO wants to know about your relationships, writes David Mills

NEW jobs, new relationships, new human beings ... a lot can happen in a year that will impact your finances.

Big life events can also affect your tax return, and there are several things to consider if you’ve experienced change in the past 12 months.

Average workers switch jobs 12 times during their career, according to The Australian Institute of Business, and that means many people have more than one boss each year.

H&R Block director of tax communications Mark Chapman said people who had changed jobs should have payment summaries from each employer.

“A really common mistake is people forget that they worked for someone else at the beginning of the tax year,” he said.

Etax Accountants spokesman Ashley Debenham said some workers ran into problems because multiple employers had provided them with the tax-free threshold (currently the first $18,000 earned per year).

“People don’t understand the implications of that question when they start a new job and they are asked if they want to claim the tax-free threshold, and they end up owing a couple of thousand dollars to the ATO,” he said.

NEW PARTNER

If you started a relationship in the past 12 months, the ATO will want to know about it if:

The relationship

• is recognised under law (being married). • a partner on a genuine domestic basis in a relationship as a couple.

“There are certain things like the Medicare levy, and private health insurance rebates; they’re all calculated on your joint income,” Mr Debenham said.

If you changed your name when you got married, he advised informing the ATO before doing your tax return.

You live with BREAKUP

The ATO will want to know if and when you broke up, and your ex’s income for the financial year. That can prove tricky for recently broken-up couples if things ended badly.

But Mr Debenham said the ATO “will generally allow you to put in an estimate of your ex’s income” so you don’t have to contact them.

Mr Chapman said maintenance payments received from an ex-partner were not taxable “but equally the person who is making the payments can’t claim them as a deduction”.

NEW BABY

New parents will often ask if they can claim deductions for child care and other items but it’s a no, says Mr Chapman.

One thing that can affect parents’ tax returns is if they open a savings account in the child’s name.

“Income from those accounts is taxable on the parent, not the child, so that interest will have to go on your tax return,” he said.