17 Aug 2010

Couples could save thousands in tax under new bill

6:17 am on 17 August 2010

Couples could save up to $9,000 a year under new legislation allowing them to split their income for tax reasons.

United Future Party leader Peter Dunne tabled the Taxation (Income-sharing Tax Credit) Bill in Parliament on Monday.

If passed, the legislation would enable couples with dependent children under the age of 18 to share their incomes equally and pay tax based on half the shared income.

Mr Dunne, who is also Revenue Minister, says up to 310,000 families could benefit from the proposal, which could save couples up to $9,000 a year.

If one partner earns $70,000 a year and the other $30,000, their combined income means neither would pay the top tax rate - saving them thousands of dollars.

Households earning $140,000 would benefit the most from a tax credit of more than $9000.

United Future says the bill could encourage more parents to stay home with their children.

Mr Dunne concedes income splitting will not benefit all families, and that low- and middle-income earners will miss out. However, he says those families are already being assisted by Working for Families.

Under its supply and confidence deal with United Future, the National Party will support the bill's first reading.

Prime Minister John Key says he expects vigorous debate on the issue, but warns with government finances tight, there is a high bar on tax changes.