Dunne launches income-splitting bill
More than 300,000 families will be able to split their income for tax purposes and reduce their liability under legislation announced today by Revenue Minister Peter Dunne.
Mr Dunne has introduced the bill as leader of the United Future Party, and he has government support to get it through a first reading and into a select committee for public submissions.
It allows parents with children up to age 18 to combine their income and split it down the middle for tax purposes.
That would move each income into lower tax brackets and a tax credit would be paid out at the end of the year.
Because of the way the tax system works, the maximum amount that could be gained is just over $9000 a year.
"The bill will give couples with children the option of having a parent work fewer or more flexible hours, be at home raising their children, and able to increase their combined after-tax income," Mr Dunne said.
"We constantly hear the term `family-friendly' bandied about, but this bill will actually put money in the pockets of many families who choose to have a parent more actively involved in raising their children."
Mr Dunne acknowledged at a press conference his bill would help high income families the most, and said that was inevitable.
"The more you earn the more you are likely to benefit, but those people have the same stresses and strains as other families and those other families are catered for by Working for Families and other forms of social assistance," he said.
Because of the tax brackets, the scheme works for incomes up to $140,000. People who earn more than that can still split incomes but don't gain more than the maximum $9080 a year.
Income splitting has been United Future policy for years, but the Government has not previously been keen on the idea.
Mr Dunne said he wanted families to make their case to the select committee which deals with the bill, and believes there will be overwhelming support for it.
"I think it's going to be a big challenge for the Government, should it decide not to proceed with income-sharing legislation," Mr Dunne said.
"I say to the politicians -- any party that chooses to actively oppose this legislation is sending a very clear signal to New Zealanders that they are actively opposing choice in the interests of New Zealand families."
Mr Dunne has calculated that with maximum uptake, income splitting would cost the Government about $450 million a year in lost revenue.
The Labour Party said it would oppose the bill and accused Mr Dunne of "a form of moral blackmail".
Revenue spokesman Stuart Nash said it favoured wealthy parents over families that really needed extra support.
"Income splitting does not actually help those who really need it," Mr Nash said.
"It is absolute nonsense to claim this policy is about caring for families. It is about giving wealthy families an extra leg up."
If Mr Dunne's bill is enacted, it will come into force on April 1 2012.
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Comments and questions16
A flat tax is fair to absolutely everybody and does away with the need to income split which has such a narrow target,.
Well done Dunne!
"I think you will find that I am one of many people who would not normally dream of rocking the boat but see this as an issue of basic fairness, and when the time comes will make a submission in support."
I know many people/families in the "same boat" who will be making submissions in support of this as well. I think the government, and opposition, will be quite surprised with the amount of support it gets.
A "nightmare to administer and control"? I disagree. I do agree though that a flat tax would be easiest and by definition the ultimate in fairness but until then, this is a big step forward.
Excellent, when it comes to parental responsibility both are treated equally, when it comes to property rights when splitting assets after a bust up both are treated equally.
We reduce the payments to couples when they have retired or are on a benefit because they are treated "as a couple", so it is only fair when calulating income tax that they are treated "as a couple".
OK a few may benefit from Working for Families as well, but for those who decide to have one parent working damned hard so the other can stay at home to provide for childrens needs have to sacrifice much more than just income lost and high taxes paid. The non working partner drops off the work skill ladder and at some point has to get back on, they sacrifice far more that many imagine.
Income splitting if allowed may reduce the use of Trusts and Company structures to give effect to income splitting but at an administrative (non productive) cost to the country. Legal and Accounting costs for no apparent productive gain.
Lets hope this gets through. It certainly makes more sense than the UnFair Divenend Regime that was rammed through by Cullen (with Dunnes help)
Great scheme in theory Peter but....................
It will be a deadset nightmare to administer and control.
Maybe back in the days when a marriage was a marriage, generally lasted a while, and you had to be married to get recognition of the relationship but now.......
Imagine the three different 'partners' in a year scenario. Are we going to get 25 days of this relationship's credit 94 of the second relationship's credit and 38 of the third? It will be impossible.
And of course there are two parties sharing now where say for working for families it is only the one caregiver paid out. The husband who left half way through won't be wanting to share his income splitting 'gains' with the estranged wife and then if he takes up with a higher earning partner where is the ine drawn.
Idealistic but impossible I'd say.
Best thing you can do Peter is get into bed(not literally of course - imagine the income splitting equation it would create) with Rodney and Roger agitate for a flat tax rate.
5:58 - how is this different to the working for families situation? Some DPB Queen hooks up with multiple partners over a similar time period and can claim against all of them. Whats the difference? Nobody is talking about this being an admin nightmare.
Congrats on Peter Dunne for confronting the elephant in the room and that is that if you earn 'too much' the country gives you sweet FA.
A flat tax is fair to absolutely everybody and does away with the need to income split which has such a narrow target,.
The tax system is currently grossly unfair to families who invest in their chidlren. The government penalises them by taxing the earning parent very heavily. This is discriminatory for families who choose to care for their children.
Income splitting for tax is only FAIR and reasonable.
Well Tired of paying for everyone else are you talking about working for families or child support? Because if she is a 'DPB Queen' she is hardly going to admit a relationship is she?
Family assistance can be a problem to administer as well but it attachs to the children (via the caregiver) - this thing will probably go to the individual earning the higher income.
I appreciate the sentiment and from a personal perspective would get a lot of financial benefit(god knows it's about time taxpayers who have carried the country for years but never get any government handouts got some help) but the logistics are too tough to sort out.
Couples and familes are easily enough treated as one unit for various asset and income testing purposes. There is no reason why they can't, nor why they shouldn't, be treated in the same way for tax purposes. Given that such families are in reality one economic unit, why ought they be treated differently based upon whether one or both earns the income (save for the fact there's $450M of revenue in it, and the 'rich' must pay). I'm certainly motivated by self interest here in that on average I stand to gain the maximum benefit (which is not to say, being self employed, that I necessarily will ever see all of the income that makes me 'rich"). Frankly, I work very hard to provide for my family, and also a living for a number of employees (all of whom must be paid before I see a cent incidentally, which is as it should be) so I don't see it as greedy to wish to be treated fairly in this one respect. I never expected to be saying it, but good on you Peter Dunne. I think you will find that I am one of many people who would not normally dream of rocking the boat but see this as an issue of basic fairness, and when the time comes will make a submission in support.
This will bring lots of families to vote for Peter Dunne. Good on him.
Dunne's proposal only allows income splitting for couples with dependants 18 years and younger.
The fair systems is Gareth Morgan's flat tax rate and benefit replacement. (google "gareth morgan tax idea" )
Yet another reason for childless (single income) couples to go to Aus. Who's going to cover a $450m shortfall? You guessed it.
A childless, single income couple? If you are so hard off, why does the other half not get a job?
... sounds like a good idea to recognise the value of a partner staying at home and raising the children.
However, the high cost of the initiative means it's going to have to be enormously popular to get over the hurdle of being more important than a tax cut to the majority or alternatively reducing expenditure elsewhere.
Given that WFF folk aren't eligible - then it's a further bunch of middle NZ who stand to benefit. It may also encourage some professionals with a partner at home to consider staying in NZ rather then heading overseas and often away from close family and friends to chase some extra dollars.
Maybe even the kind of professional and skilled folk we'd like to have stay here maybe. And it's definitely better than that ridiculous baby bonus across the ditch.
Contrast the price tag with some other government initiatives such as the recently secured $300m Broadband Fund and the likelihood of this policy being implemented doesn't seem so extraordinary. It has been developed to target parents with dependent children but could easily be tinkered with to fit within budgetary constraints. And really, a 9k tax credit for the full time job of raising kids is a drop in the bucket compared to the tangible societal benefits of having a parent at home most of the time. This is the policy to vote for at election time. New Zealand voters will be looking forward to replacing that cankerous party ACT with a real third party alternative.
De pendant children under 18 that is. But it could easily be used to benefit those with children under 10yrs to reduce the price tag.
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