Is spousal maintenance taxable in Australia? Parents are not required to declare any spousal support payments to the Australian Taxation Office. Spousal maintenance is not taxable. However, parents must inform Centrelink of their spousal maintenance payments if they get income-tested Centrelink benefits.
After the breakdown of a marriage or a de facto relationship, a party may award spousal maintenance to their former husband or former wife. This is if there are situations where the supposed receiver of spousal maintenance is unable to provide financial support for themselves. When is spousal maintenance payable? A person may be eligible for a spousal maintenance application under Australian law if they:
- Are the primary carer of a young child or a disabled child
- Are providing child support for another child
- Have not been working for several years
- Have not been working due to health reasons
- Are having trouble securing employment
What Does the Family Law Act Say?
When talking about ‘is spousal maintenance taxable in Australia’, it’s important to know what the Family Law Act 1975 says. Spousal support matters in Australia are taken into consideration in Section 75 of the Family Law Act. Section 75 takes into account a number of factors or matters while determining spousal maintenance, including:
- Earning capacity and potential for income for both parties
- Property
- Finances and reasonable expenses
- If a family member can provide financial support to the lower-earning party
- Which partner is responsible for, or in charge of a marital child under the age of 18
- Both parties’ commitments to provide for their own needs, those of a dependent, or those of another
Any spouse may file a petition for spousal maintenance if they can show that they cannot support themselves on their existing pay. They may also apply for spousal maintenance if they do not have the potential to increase their pay. Couples who are divorced for less than a year or are separated but still married can apply for spouse maintenance.
Is Spousal Maintenance Taxable in Australia: De Facto Relationship
When talking about ‘is spousal maintenance taxable in Australia’, it’s also important to discuss de facto partners. De facto partners are couples who continue to live on a genuine domestic basis but are not legally married. Spousal support can also apply in de facto relationships which is called de facto maintenance.
Similarly, a former de facto partner may also have difficulty securing employment. Hence, the higher-earning de facto partner has the obligation to financially support their former de facto partner who earns much lower than them. The family court will only issue a de facto maintenance order if the de facto relationship satisfies specific jurisdictional requirements.
Two Types of Spousal Maintenance Orders
When talking about ‘is spousal maintenance taxable in Australia’, it’s important to tackle the two types of spousal maintenance orders. The court may issue interim spousal maintenance orders in order to provide a party with financial support while awaiting final rulings. It is a stopgap measure until the court makes final rulings.
On the other hand, partners must first decide on property settlement before issuing a final maintenance order. This is because there are times when a property transaction might be unneeded or impractical maintenance. In some cases, after the properties are divided, one side receives a sizable amount of property, making maintenance unnecessary.
Tax Exemption and Deduction for Maintenance
When talking about ‘is spousal maintenance taxable in Australia’, it’s important to identify exemptions and deductions for spousal maintenance. Spousal maintenance payments are not taxable to the receiver if they are made:
- To a person who is or has been the payer’s spouse
- To or for the benefit of the payer’s child
- To or for the benefit of a child of the other party to the marriage.
The maintenance payments made to de facto spouses are likewise exempt from this rule. The exemption only applies to payments attributable to the maintenance payer. It does not apply when the payer makes the payments in order to sell an asset that generates income or to divert otherwise taxable regular income.
Essentially, the exemption is inapplicable if the payer is not acting improperly. In terms of deductions, the maintenance payer cannot deduct maintenance payments from his or her salary or wages. One cannot claim spousal maintenance as a tax deduction.
How Long Do Spousal Maintenance Payments Last?
While divorce proceedings are being finalised, higher-earning spouses can pay spousal support in regular instalments or as a single lump sum. The spousal maintenance order may have a beginning and end date that are set, or ordered to continue indefinitely. The time factor will change depending on you and your former partner’s circumstances.
If a new spouse or new de facto partner enters the payee’s life, spousal maintenance will effectively end. In general, spousal maintenance is not payable to a person that has previously been married if they are remarried. The payer may also apply to end their obligation to pay spousal maintenance for the following reasons:
- Changes in financial circumstances
- Changes in the cost of living and reasonable expenses
When talking about ‘is spousal maintenance taxable in Australia’, we should also talk about how long does spousal maintenance last for de facto partners. The court will evaluate the combined financial resources between the former de facto partner and their new partner. This is if a former de facto couple’s maintenance recipient is still entitled to payments if they begin a new de facto relationship.
Is Spousal Maintenance Taxable in Australia: Losing Spousal Maintenance
Another question besides ‘is spousal maintenance taxable in Australia?’ is if it’s possible to lose spousal maintenance. The answer? Yes. Changes in circumstances may have an impact on spousal maintenance. A person may lose spousal maintenance if they:
- Got treated for their ailments/disabilities that made them incapable of working in the first place
- Started studying/training again in order to secure employment that requires a degree or accreditation
- Started a new de facto relationship
- Married another person
- Stopped paying child support for a dependent that turned 18
- If the person receiving spousal maintenance dies
- If the person paying spousal maintenance dies
Seeking Legal Advice From JB Solicitors
It’s always important to seek legal advice, especially if people tend to ask themselves ‘is spousal maintenance taxable in Australia’. Again, spousal support or maintenance is not taxable. However, there are ways and instances that may alter a spousal maintenance payment and even stop spousal maintenance.
JB Solicitors’ family lawyers can aid people who are having legal issues surrounding spousal maintenance, property settlement, and financial and tax issues. Family law is very broad and people should not simply tackle family law matters alone. Moreover, the family court will require applications and various forms in order to start spousal maintenance proceedings.
Our role is to aid in the spousal maintenance process and help collect evidence and statements. This can help higher-earning spouses determine the amount of spousal maintenance they need to provide to their ex-spouse. We also have mediation and arbitration services that can resolve parenting matters and reach a binding financial agreement.
Contact us today if you need to start working on a spousal support application
