Taxing Love - The meaning of Spouse

Updated: Feb 3

Recently in the Australian Financial Review, in an article written by Tom McIlroy, it was reported that the Australian Tax Office had changed the meaning of love as it pertains to corporate debt forgiveness and natural love and affection.

Temporary Residents

We have one of our own Valentine's day update.

It relates to the special tax status of a temporary resident of Australia. It is very important for accounting firms who might be preparing tax returns for clients who hold temporary resident visa's in Australia.

As you may know a client can be a tax resident of Australia but can qualify for the temporary resident tax concessions, if they are the holder of a 'temporary visa' under the Migration Act.

That means that Australia will not tax the clients foreign sourced investment income, and it also means that the CFC rules and the Transferor Trust rules will not apply. It also means they will not need to pay withholding tax if they are paying interest on foreign loans.

So far so good. However, our job as the accountant does not stop there. In order to properly advise the client we will also have to ask whether the clients 'spouse' is an Australian citizen (or permanent resident) because if that's the case then the client cannot be a temporary resident.

Meaning of Spouse

But what is the meaning of 'spouse' these days in the Act? Per section 995-1 of ITAA 1997 "spouse" of an individual includes:

(a) another individual (whether of the same sex or a different sex) with whom the individual is in a relationship that is registered under a State law or Territory law prescribed for the purposes of section 2E of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that s