In the rush to say “I do” to the love of your life, you may have forgotten about the tax implications of your union. Life is simpler when you’re single. When you get married, things become a bit more complicated.
JustMoney looks at the role marriage plays when it comes to tax.
Tip: Use our calculator to work out how much personal income tax you’ll pay this year.
How your marriage will affect your taxes will depend on the type of marriage you’re in. Couples who are married out of community of property may not experience taxation the same way as those who’re married in community of property.
When you’re married out of community of property, you’re taxed individually. Since your assets and liabilities aren’t combined, your spouse’s tax liability won’t have an effect on you. But what happens when you’re married in community of property?
READ MORE: It’s possible to change your marriage regime.
In community of property means that you have a joint estate. Your debt and assets will be combined into one. What belongs to you is also owned by your spouse.
According to the South African Revenue Services (SARS), any income that you receive from investments or capital-gain transactions is deemed to accrue to your spouse in equal portion.
For instance, if your income from the sale of your house is R1 million, your spouse is entitled to 50% of that (R500,000). That means you’ll pay tax on your share and your spouse will pay tax on his or her share. This also goes for rental income from fixed property.
What about donations tax?
According to SARS, donations tax is payable on the total value of property disposed of, whether directly or indirectly, by a resident by means of a donation. This tax is only applicable to gifts which exceed R100,000 and it’s levied at a flat rate of 20%.
However, there is a category of people who are exempt from this tax and married couples fall into this category. If you donate shares, money, or even a house to your spouse, neither you nor your spouse will be liable for tax. Some couples use this as a tax saving method.
Usually the spouse who earns more would donate income-generating property to the spouse who’s earning less. However, you must note that making donations to avoid tax is illegal and you could be penalised for it.
… and retirement funds?
Tax on retirement accrues to the spouse to whom the benefits are paid or are payable to as a member of the fund. If your spouse withdraws or retires from the fund, only your spouse will be liable for taxes accrued.
However, if you and your spouse divorce, the non-member spouse who’s receiving payment from the pension fund will pay tax unless he or she transfers the pay-out to another pension fund.
What if your spouse dies?
Estate Duty Act states that if your spouse dies and leaves you with assets amounting to R3.5 million, you’ll be exempt from paying estate duty. According to SARS, estate duty is a form of tax that is levied on the deceased estate. Its purpose is to tax the transfer of wealth from the deceased estate to the beneficiaries.
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