A proposal to allow couples with children to split their income for tax purposes would cost up to $450 million a year, a discussion document released yesterday says.
United Future leader Peter Dunne, who is also Revenue Minister, has long pushed for income-splitting, saying it would help couples who have
one partner stay at home or work part-time in order to look after children.
National agreed with Mr Dunne after the last election to support the introduction of legislation for income-splitting.
Yesterday, Mr Dunne released a detailed discussion document on how it would work.
Under the proposal a couple with children under 18 would combine their income and split it equally.
These incomes would have the progressive tax rates applied to the split income and this would be compared with the couple's actual tax liability and the difference paid out at the end of the year as a tax credit.
A couple with a primary income earner on $40,000 and the other earning nothing would get a credit of $1190.
If that primary income was $80,000 the tax credit would be $5530 and on $140,000 it would be $10,450.
If the other partner is working as well that amount reduces.
A couple with one earning $50,000 a year and the other $20,000 would get $240 or $80,0000 and $30,000 would get $2160.
Inland Revenue estimates that a tax credit designed like this would benefit more than 300,000 families and cost around $450 million.
It would cost up to $3 million to implement and up to $4 million a year to run.
An alternative to apply the credit to only children under 6 would cost around $230 million a year and less to run.
Mr Dunne said financial considerations played a large role in couples deciding whether both should continue working or one should stay at home to care for children.
"Income-splitting is one way of enabling parents to have greater choice in their work and caring roles," Mr Dunne said, "and also recognises the valuable role played by parents who choose to opt out of the workforce to raise their children".
- NZPA
