How does getting married affect my tax?
Hi Barefoot, We are getting married in June next year. I’d like to know what tax implications there are after we get hitched. We are both 27, I earn $64,000 a year and he earns $74,000. We currently keep our finances separate and plan to do so until the marriage (though we have joint savings for the wedding, which will be spent). Hi Kelly, Congratulations. You are the first bride-to-be to put tax planning on their to-do list.
Bridesmaids’ dresses? Check. Flowers? Check. Tax implications of nuptials? . . . Email the Barefoot Investor.
Then again, you’re talking to a guy who times his Barefoot Date Nights to coincide with the monthly Reserve Bank meeting. Hot!
OK, so the big change is an administrative one. Once you’re married, you’ll need to record on your tax return that you have a spouse, and include his taxable income. Your spouse will have to do the same on his tax return.
The Australian Taxation Office needs your spouse’s income to work out if they can slug you with extra tax (couples without private health insurance that earn over $180,000 combined will be hit with a 1 per cent Medicare Levy Surcharge, rising to 1.5 per cent for couples earning over $280,000), and also to work out any family tax benefits. There are a few other implications. The Good: you can split your (non-salary) income with your spouse, so always invest in the lowerearning spouse’s name. The Bad: if you both own a home, you have to choose which one gets the capital gains tax (CGT) exemption. Talk to your accountant. The Ugly: watch Seven Year Switch on Channel 7.
Dear Scott, We are two mothers — a couple wanting to have a baby. We finished reading your book a couple of weeks ago and have started implementing the strategy. The trouble is, I have never wanted to have kids until I had enough money, but my partner wants them as soon as possible. And I admit the biological clock is ticking. We both work but have next to no money. I thought you may be interested in a same-sex couple. We too have financial troubles . . . it is not easy, that’s for sure. Hi Annie, On one hand, you wouldn’t be the first broke parents to decide to have a kid.
On the other hand . . . what are you thinking?
You need to take responsibility for your financial situation before you can take on the ultimate financial responsibility of having a child. You’ve read the book, so you’ve got your road map — now it’s time for wine, garlic bread, and action.
Borrow to buy shares?
Hi Scott, My husband and I are both 40, have two very young girls, and have owned our home outright for three years. We are now down to one wage ($100,000), but have also managed to put away $90,000 in savings. We have borrowed to invest in shares, on the advice of our financial adviser. But we think we could have been saving this money instead. What is your take on this? Hi Natalie, Getting the banker off your back is (financially) the best thing you could have done for your family.
Now, the strategy your financial adviser has you on is negative gearing (in this case shares, not property). And while the gains can look awesome on a spreadsheet, most people don’t have the ticker for a stock market crash on borrowed coin.
There are two major purchases that money can buy: the financial security of never having to worry about money again, and the freedom to spend time with your family and friends.
First, save up three months of living expenses in a Mojo savings account.
Second, max out your pre-tax super contributions of $25,000 each year. That’ll give you both a tax deduction and a secure retirement.
Third, set up a long-term share investing program to fund your kids’ education, awesome family adventures, and weird hobbies. Invest in the lower-earning spouse’s name and, if you’re a nervous investor, do it without debt.