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Discussion Document On Tax Splitting Released

Contributor:
Fuseworks Media
Fuseworks Media

A government discussion document seeking views on the idea of allowing families with children to split their income for tax purposes, to reduce their tax bill, was released today.

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 discussion 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," Mr Dunne said.

"If they favour incojme 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."

Income splitting typically occurs when the income of a higher earning partner is allocated to a lower earning partner, reducing the family's overall tax liability.

Those who would gain most would be families in which one parent earned $120,000 or more a year and the other had no income. If its income were split on a 50/50 basis, that family could reduce 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.

Similarly, if one parent earned $60,000 and the other parent earned $30,000 the family would have a tax saving of about $960.

Submissions close on 30 June.

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