Some legal considerations when moving in together
Becoming part of a couple and moving in together can trigger unexpected legal and financial consequences. Generally, financial motivation is not the reason most couples move in together but, if you are considering coupledom, it makes sense to consider any financial traps and benefits. Here are some you should consider:
- Medicare levy surcharge: If you are co-habiting, you will fall under the couple thresholds. If you are on a lower income (below $90,000) as a single you may not have applied for private health insurance before because there were no tax consequences. However, if your partner has a higher income and your joint income is pushed above $180,000, you will become liable for an extra 1% in tax if you don’t have private health cover.
- Private health insurance rebate: If you are co-habiting on the last day of the financial year (30 June) you are income tested against family thresholds for the entire year, even if you have lived together for one day or the whole year. There are different rebate tiers for singles and families and, if you are on a lower income and your partner has a higher income, then you might no longer be eligible for the rebate. The end result may be that you have to pay back any rebate you received during the year at tax time. The family tiers start at $180,000 and cut out completely at $280,000 so if you might lose all or part of your rebate, you should contact your private health insurer and reduce or remove your rebate.
- Businesses and structures: After moving in together, your partner’s business might become your business too, if you end up doing the books and the paperwork. If you are on a lower income, the business income may be split with you. This can be done by changing the business structure or paying you a wage but in essence, the family income increases through income splitting. As there are many rules and regulations that dictate when income can be split, it is a good idea to seek professional advice to see if this is something that can benefit you.
- Income and assets: Once you are sure the relationship will work, it’s worth looking at how the assets are held between you. It may save you money to have the partner with the lowest tax bracket receive additional income such as interest while the partner with the highest income has the deductions, like donations. It may be worth looking at whose name assets should be in, both from a tax minimisation and asset protection viewpoint as, depending on loan balances and private residence capital gains tax exemptions, it may be worthwhile to sell assets to third parties, another structure or to each other to maximise your tax situation and minimise risk. Good professional advice is essential.
- Wills, Powers of Attorney and Superannuation: Moving in together is a good time to review your Will and Power of Attorney. Remember that marriage invalidates your Will and, if you divorce, the ex-spouse named in your Will loses any benefit from it. Moving in without marriage does not affect your Will. Also, it is a good idea to check your superannuation to ensure the beneficiary is correct and for you to complete a binding nomination if appropriate.
The best thing to do when taking the step to move in together is to seek professional advice.