Taxing Maintenance and the Divorce Rate

Getting a divorce is a challenging and emotional experience, and it requires financial spousal support.

Namibia’s divorce rate is high, and I have a deep interest in the taxability of maintenance.

Should maintenance be taxed? Namibia’s Income Tax Act 24 of 1981 does not contain specific provisions relating to maintenance, therefore some provisions along with relevant case law must be studied.

In most countries, including the United States, maintenance involves taxable income for the recipient and is tax deductible for the taxpayer.

This means the spouse receiving maintenance payments must report such payments as income on their income tax returns, while the taxpayer making the payments can claim expenditures from their taxable income.

However, it is important to note that child support payments are not taxable, as they are intended for the well-being of the child and not as a form of income for the involved parent.

A general principle followed in the act is that all revenue receipts are taxable, unless exempted by the act, and all capital receipts are not taxable, unless provided for by the act.

The most important right under divorce and matrimonial laws is the right to claim and receive maintenance. This involves an allowance or amount a court orders one partner to pay the other partner for their sustenance.

Many courts have ruled that an abandoned partner is entitled to maintenance.

In terms of South Africa’s tax act, “income” is deemed to be income received by or accrued to a taxpayer.

Section 7(2) of the act deems income from a former spouse to be income.

A spouse who pays maintenance may deduct an amount equal to the maintenance payments paid during the year. Maintenance payments to the other former spouse are taxable.

This means it is part of the spouse’s gross income.

It is said that marriages are made in heaven, but separation happens much closer to the tax authorities.

In this case it happens much closer to the Namibia Revenue Agency.

The Namibia Income Tax Act does not contain specific provisions relating to maintenance, but in Namibia, the law of the land places an obligation on one spouse to maintain the other spouse, which arises from the status of a marriage.

Under Indian law, the right to maintenance extends not only to the spouse.

“Income”, according to this act, is the periodical monetary return with some sort of regularity or expected regularity from definite sources.

If one spouse claims monthly maintenance to constitute a revenue receipt, a source of the receipts must be established, and it is established in the form of the law.

Therefore the monthly maintenance being a regular and periodical return from a definite source must be held to constitute revenue of receipt.

So, lump-sum receipts in the form of maintenance would not be taxable in the hands of the receiving spouse, whereas monthly payments would be treated as such.

I support this tax policy to be implemented in Namibia.

Perhaps it would reduce the divorce rate and discourage the high demand for income from one spouse.

Oscar Matengu