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 g
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.
