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 and today he 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 would be 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 and 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 six 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 stayed at home to care for children.
"Income splitting is one way of enabling parents to have greater choice in their work and caring roles, and also recognises the valuable role played by parents who choose to opt out of the workforce to raise their children," Mr Dunne said.
Once comment had been received on the proposals legislation would be introduced next year.
While National has agreed to allow the bill to go to a select committee for consideration its support beyond that is not certain.
Those in favour of the proposal say it would recognise the contribution of full time parents and strengthen the family unit.
Opponents argue it favours those on high incomes and the credit did not match ability to pay tax or the need for assistance.
