KEY POINTS:
A Government discussion document seeking views on the idea of allowing families with children to split their income to reduce their tax bill, was released yesterday.
Revenue Minister Peter Dunne said the discussion document looks at the merits of introducing income splitting as a way of providing additional support to families with children.
Its publication is the result of a commitment made in the confidence and supply agreement between Labour and United Future.
"The document looks at the advantages and disadvantages of income splitting and asks readers whether they think it would be the best way of providing additional support to families with children," he said.
"If they favour income splitting, readers are asked to comment on the form they think it should take - whether, for example, it should be on a 50/50 basis, what age limits should be set for the children involved, and what would constitute a 'family' for purposes of splitting income."
In income splitting the income of a higher earning partner is allocated to a lower earning partner, reducing the family's overall tax liability.
Families in which one parent earned $120,000 or more a year and the other had no income would gain the most. Splitting the income 50/50, the family could cut its annual income tax by nearly $9000.
When one parent had an income of $60,000 a year and the other had none, the tax saving to the family would be just over $3000, assuming the same 50/50 split. If one parent earned $60,000 and the other $30,000 the family would save about $960. Submissions close on June 30.
- NZPA