We receive many questions from taxpayers about how to declare their income in the event that they are married in Community of Property (CoP). Hopefully our answers below will clarify the issues for other taxpayers who may be grappling with the same questions. You can also read more on how tax and marriage work in our blog here. Take a look at some of the Q&As below:
1. I have been living with a woman as husband and wife for 17 years and see no point in getting officially married. Would the tax rules for tax-free donations between spouses apply to me? Please tell me I don't have to get married!
In 2001 a definition of "spouse" was introduced into the Income Tax Act. In terms of this definition, "spouse" means, in relation to any other person, a person who is the partner of that person:
-in a marriage or customary union recognized in terms of the laws of the Republic;
-in a union recognized as a marriage in accordance with the tenets of any religion; or
-in a same sex or heterosexual union which the Commissioner is satisfied is intended to be permanent.
Therefore based on the information you have provided, it sounds like you would fit into the third point above and that your partner would be classified as your "spouse" without formally getting married.
2. I am 66 years old, married in CoP and I am a provisional taxpayer. My total annual income is R170 000 which consists of annuity income of R60 000 and R110 000 fixed deposit interest. What is the maximum I can earn before I pay tax?
You can earn taxable income up to R122 300, which will be tax free. In addition, there is a R34 500 interest exemption, therefore only interest above this amount, will count towards the R122 300 threshold. Since you are married in CoP, R55 000 interest (i.e. 50% of R110 000) would be allocated to you. The taxable portion would be R55 000 less the R34 500 exemption, which equals R20 500, plus the annuity of R60 000. The total equals R80 500, which is below the tax threshold of R122 300, which means you won’t pay tax.
3. I'm married in CoP. Do I need my own tax reference number or can I file my return jointly with my spouse under his tax reference number?
Yes, you need your own tax reference number. You would submit your own return to SARS with your own details but indicate that you are married in CoP.
4. We are married in CoP. We are both registered with SARS. Neither of us works for an employer. We receive investment and rental income, which is in my husband’s name. Does my husband report all the investment and rental income on his tax return or should it be split with 50% reported on his return and 50% reported on my tax return? If the investment and rental income is only reported on my husband’s return what should be reported on my tax return. Should we both also pay provisional tax?
He will complete a tax return stating he is married in CoP and include the full amount as it is in his name. He will also show your name and tax number and then SARS will issue you with an assessment, which will include your 50% share. You will both need to register as provisional taxpayers and declare your 50% share of the rental income and investment income in your respective IRP6s.
5. I understand that when one spouse receives interest or dividends, that it is deemed to have accrued equally between the spouses married in CoP. When completing the tax return and answering the questions that TaxTim asks you, do you fill in 50% of the interest or dividend that you earn as the other 50% will be taxed in the hands of the spouse, or do you fill in 100% of the interest or dividends?
If you earn the interest and dividends, you must include the 100% amount but ensure that you have indicated to SARS that you are married in CoP so that SARS will divide it on assessment between you and your spouse.
6. I intend to donate my tax-free portion of my retirement fund to my wife so that she can invest it for an income after retirement. We are married out of CoP. Will I have to pay donations tax on this gift?
Donations made between spouses are not taxable so neither you nor your wife will have to pay any donations tax. Please read more about donations tax in our blog here.