The biaxial phase in nematic liquid crystals has been elusive for several decades after its prediction in the 1970s. A recent experimental breakthrough was achieved by Liu et al. [PNAS 113, 10479 (2016)] in a liquid crystalline medium with magnetic nanoparticles (MNPs). They exploited the different length-scales of dipolar and magneto-nematic interactions to obtain an equilibrium state where the magnetic moments are at an angle to the nematic director. This tilt introduces a second distinguished direction for orientational ordering or biaxiality in the two-component system. Using coarse-grained Ginzburg-Landau free energy models for the nematic and magnetic fields, we provide a theoretical framework which allows for manipulation of morphologies and quantitative estimates of biaxial order.