To help you find out what the ATO will expect of your tax return now that you are single again, SingleMum.com.au has gathered together as much information as we could find that relates specifically to family breakdown - direct from the Australian Taxation Office (ATO) website. We hope that this will help you to make more informed decisions regarding your 2011 tax return - and maybe even improve your tax outcome!
The following information was extracted directly from the ATO website as of 28th June 2011, however always check the ATO source webpage here for any updates or changes
To view the full family tax information guide, go direct to the ATO website here
Sections within Family breakdown
Child support and spouse support payments are not included in your taxable income, but they are part of your adjusted taxable income. Your adjusted taxable income may be used in the calculation of income tax offsets.
We cooperate with the Child Support Agency to:
Refer to the Child Support Agency website (www.csa.gov.au) for information on tax returns and child support.
Selling an asset can mean you have to pay capital gains tax. However, when you transfer assets to your spouse as a result of the breakdown of your marriage or de facto marriage, it is classified as an 'automatic rollover' of those assets and you will not have to pay capital gains tax at that time. Automatic means you cannot choose whether or not it is a transfer or roll-over.
This rollover ensures the transferor spouse disregards a capital gain or capital loss that would otherwise arise, and the one who receives the asset (the transferee spouse) will make the capital gain or capital loss when they subsequently dispose of the asset.
This applies to you if your marriage or relationship ended on or after 20 September 1985, and:
As a general rule, capital gains tax (CGT) applies to all changes of ownership of assets on or after 20 September 1985. However, if you transfer an asset to your spouse as a result of the breakdown of your marriage or relationship, there is automatic rollover in certain cases. You cannot choose whether or not it applies more...
For rollover to apply, one of the following events must happen. The transferor:
For an overview of capital gains tax, read Introduction to capital gains tax.
For further details, read Marriage or relationship breakdown rollover.
Summary of capital gains tax events includes details of the individual events referred to in this document.
Splitting of superannuation or annuities between divorcing partners is similarly treated as a roll-over. As the funds are not being released as a payment, this roll-over split does not need to wait until retirement.
The Family Law Act 1975 and the Superannuation Industry (Supervision) Act 1993 (SISA) provide for an interest in superannuation (super interest) or a super payment to be divided or split by agreement or court order in the event of a relationship breakdown. These laws also apply to defacto couples, whether of the same or opposite sex.
A member's super interest is defined as their 'interest in a superannuation fund' - generally, an account will constitute an interest in the fund.
Super agreements and court orders specify how a member's super interest in the fund or how a super payment is to be split between the member and non-member spouse.
A spouse includes another person, although not legally married to the person, who lived with the person on a genuine domestic basis in a relationship as a couple (whether of the same or different sex).
Depending on the rules of the fund, it may be possible for a member's super interest to be split immediately upon receipt of the agreement or order, rather than waiting for a member's benefit to become payable (such as when they meet a condition of release). This means that the obligations under the agreement or court order can be finalised closer to the time of separation, rather than waiting until retirement of the member spouse.
If available, a new super interest can be created for the non-member spouse in the member's fund, or transferred or rolled over to another fund. In some cases, the non-member spouse may be immediately entitled to be paid their interest in the form of a super benefit.
The tax-free and taxable components of the super interest or a super payment must be calculated immediately before the interest split or payment, and divided between the split interests or payments in the same proportion.
Changes were made to the Family Law Act 1975 and Regulations regarding splitting annuities on relationship breakdown. The Income Tax Assessment Act 1936 was also amended to ensure that annuities are taxed consistently like other super benefits split on relationship breakdown.
For more information, refer to:
Where a new interest in super is created for the non-member spouse, any super benefits subsequently taken by the non-member spouse from the new super interest are taxed according to the current rules for member benefits.
When relationship breakdown occurs after a super income stream has started to be paid, a super agreement or court order made under the family splitting laws can specify that the super income stream be split.
In most cases, the super income stream would be commuted and the non-member spouse paid the entitlement under the agreement or court order. The remainder would be paid to the member spouse either as a lump sum or a reduced super income stream.
Where the non-member spouse's entitlement is paid as a super lump sum, it is treated as a separate super lump sum benefit for the non-member spouse.
If the non-member spouse's entitlement is paid as a super income stream, it is treated as a separate income stream for the non-member spouse.
Where the super income stream is unable to be commuted due to the governing rules of the fund, the split is effected by dividing each income stream payment between the member spouse and non-member spouse.
The split will result in two regular payments being made from the same income stream, one each to the member spouse and non-member spouse.
More information on super and relationship breakdown is provided by the Department of the Attorney-General at www.ag.gov.au
If you are a trustee or investment manager of a regulated super fund, you are not prohibited from acquiring an asset from a related party of the fund where the acquisition occurs as the result of a relationship breakdown of a member of the fund.
In this case, 'relationship' includes opposite-sex and same-sex de facto relationships.
The asset may be acquired from a trustee or investment manager of another regulated super fund.
The tax consequences from splitting super on relationship breakdown could include:
For more information, visit the Attorney-General's Department website www.ag.gov.au
Correct as of 28/06/2011 - Always check the ATO source webpage here for any updates or changes
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