Here’s what you need to know about tax when getting married

Are you getting married soon or are recently married? Besides from planning your wedding, you should also consider the tax implications of marriage, says Daniel Baines, a legal advisor/tax consultant at PW Harvey & Co.

How you are taxed after you are married will depend on how you get married. “In South Africa you have two main options, getting married in community of property or getting married out of community of property. The default position is being married in community of property; in other words, if you did not deal with this issue prior to being married you will be married in community,” said Baines.

However, if you entered into an ante-nuptial contract prior to your marriage, you are then married out of community of property and different tax considerations will apply, he pointed out.

It is possible to change your martial regime after marriage; however, this involves a lengthy court application process.

Out of community of property

For individuals who are married out of community of property, all income that they receive is dealt with separately, said Baines. “If you let a fixed property that you own in your own name, the entire profit will be taxed in your hands. This also applies to all other types of income that you may receive.

“When you file your yearly tax return you must mark on the return ‘Married out of community of property’. For the purposes of your annual tax return, nothing much will have changed since your marriage.”

In community of property

If you are married in community of property then the situation is different, Baines pointed out. He said that the following types of income must be included in the return for both spouse’s (you must include the full amount received by both spouses in each return and then SARS should automatically halve the income upon filing of your return):

1. Local interest income;
2. Foreign interest;
3. Foreign dividends;
4. Real Estate Investment Trust (REIT) income;
5. Capital gains; and
6. Rental income and expenses from the letting of fixed property.

“Before you submit your return just click the ‘Calculate’ button to ensure that SARS has halved the income. If you are married in community of property you must mark this on the second page of your tax return, otherwise SARS will not do the apportionment,” the tax expert said.

The following example illustrates the practical effect of this.

Example A – Married out of community of property

  • Rental Property income: R50,000
  • Less deductible expenses: R20,000
  • Profit on rental property: R30,000
  • Tax at 26% (as an example): R7,800

Example B – Married in community of property

  • Rental Property income: R50,000
  • Less deductible expenses: R20,000
  • Profit on rental property: R30,000
  • Profit split between spouses: R15,000 each
  • Tax at 26%: R3,900 each

Baines said that in this example, the profit will be split between the spouses and each will pay tax on their share of the profit accordingly.

“Please note that if one spouse donates or disposes of an asset to the other spouse and the other spouse receives income from this asset, certain implications may become applicable. SARS may deem the income to have been earned in the hands of the donating spouse if that donation or disposition had the sole or main purpose of reducing, postponing or avoiding a liability for tax.

“In this way it may seem like a good idea to move money to your spouse to maximize the interest exemptions available to each person, but doing so may result in SARS deeming the interest income to the person who has donated or disposed of the money.

“If an asset does not form part of the communal estate, such as if it was left to only one spouse in terms of a will, then different considerations will apply,” Baines said.


Read: 6 laws every South African taxpayer needs to know

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Here’s what you need to know about tax when getting married