United Future's income sharing on agenda

Revenue Minister Peter Dunne in two weeks will finally introduce a Bill to Parliament calling for income sharing to be allowed between couples with children.

The United Future leader first talked about the income splitting concept in 2002 but it was not included as part of his party's confidence and supply agreement with the then Labour administration.

In 2005, the confidence and supply agreement allowed Mr Dunne to prepare a policy paper on the concept and in 2008 National agreed United Future could develop the policy and National would support the Bill to its first reading.

"I am confident I will get it through the first reading. What happens after that is an open question," he told the Otago Daily Times.

Submissions made on the concept were overwhelmingly supportive.

In 15 post-Budget meetings this year, questions had always been raised about the income sharing, he said.

Questions came from accountants, special interest groups and members of the public.

Income sharing would allow couples with children under 18 to share income between them for tax purposes.

Sharing would be voluntary and people could not be forced into it.

Whether it was a benefit or not depended on family circumstances, Mr Dunne said.

The minister estimated that the benefits for some families could be as high as $9000.

"For many people it would be quite significant."

A qualifying family with one income of $60,000 would be eligible for an annual tax credit of $2500, if the legislation was passed, he said.

A family with one partner earning $40,000 and another earning $20,000 would qualify for a tax credit of $1500.

"The higher up you go, the better off you are."

A couple earning $140,000 between them - $100,000 and $40,000 - would be eligible for a credit of $1900 but a couple with one income earner on $140,000 would qualify for about $9000 in tax credits.

Mr Dunne said the income sharing would not affect any other government assistance, such as Working for Families.

The concept would not suit everyone.

In some cases, the tax credits would only amount to $200 and families might not believe the gain was worth the effort, he said.

That was why the scheme was voluntary.

Figures showed there were about 450,000 families in New Zealand and about 300,000 had children.

"We are going to run into criticism about the Bill of Rights.

"This will be seen as discriminating by including only couples with children.

"But Working for Families is state intervention. It is not a big issue," Mr Dunne said.

Couples running businesses could split their incomes for tax purposes, something people running a household with a family could not do, he said.

Income sharing gave people choices, something Mr Dunne said he felt very strongly about.

There had been widespread support for the concept and he hoped those supporters took the opportunity to speak up as the Bill had its first reading.

If the legislation became law, it would apply from April 1, 2012.

A taxing topic

At present, 17 OECD countries - including New Zealand, Australia, Canada and the United Kingdom - use pure individual taxation.

Only four OECD countries - France, Luxembourg, Portugal and Switzerland - use pure joint taxation of earnings.