Wellington, Sept 23 NZPA - A bill that allows parents with dependent children to split their income for tax purposes has passed its first reading in Parliament.

United Future leader Peter Dunne, who is Minister of Revenue, introduced the bill which is one of his party's core policies.

Mr Dunne said up to 310,000 families would be eligible for income splitting and could save up to $9000 a year on their tax bills.

Income splitting allows parents to add their income and then split it down the middle, putting each of them into lower tax brackets.

It has the most impact for single income families, because one income could be split in half.

"For many families, income sharing recognises the real financial choice that many couples with children often have to make about whether they both work full-time and employ others to care for their children, or whether one partner stays home to care for the children, possibly on a part-time basis," Mr Dunne said during the first reading debate on the bill.

"Those who would oppose this bill are in effect saying they wish to deny New Zealand families a very helpful choice in the way they wish to raise their families."

Labour did oppose the bill, saying it would favour high income earners, but the Government backed it through its first reading and it passed on a vote of 64 to 54.

It has been sent to the finance and expenditure select committee for public submissions.