Family Tax Talking Points

  • International analysis shows Australia has one of the most hostile tax systems in the world for single income families.

  • A key reason for this is that double income families have access to two tax free thresholds whereas single income households, by definition, only have access to one. This means that two families, earning the same income and making the same contribution to the economy, are treated markedly differently under Australia’s taxation rules.

  • While this has long been an issue in Australia, the problem was made much worse by the increase in the tax free thresholds as part of previous government’s carbon tax changes — from around $6000 to $18,200.

  • A single-income household (with income of $120,000) now pays around $10,000 more tax in Australia than a double income family with the same joint income of $120,000. The disparities carry through across income levels. This situation violates the key tax principle of horizontal equity. People with similar ways and means should pay similar amounts of tax.

  • To address this, Australia should introduce a capped form of income splitting based on the successful scheme introduced by the Canadian Government last year.

  • The proposal would allow a couple with dependent children to transfer an amount of income equivalent to the tax free threshold from the higher income earner to the lower income earner for tax purposes. This would in effect give single income couples access to the same tax free thresholds as dual income couples.

  • Total tax relief per couple would be capped at $2,000 per annum. The program would deliver tax relief to upwards of 800,000 families, costing around $1.5 billion per year.

  • Shared tax arrangements such as this are not uncommon, with around half of all OECD countries having some form of shared tax arrangements.

  • Australia’s social security system, family law and child-support arrangements all assume that family income and assets are shared between family members. However, as it is presently structured, Australia's tax system does not recognise this economic reality.

  • If we are serious about helping families in this country we should look at what happen overseas and how successful it is there. We should consider how best to provide a system that does not discriminate between families and gives the best form of care for our young children.

  • Reforms are needed that recognise the reality of family economics, including family based taxation. This would remove the problem of so-called 'middle-class welfare' by encouraging family self-provision, and letting people take care of their own families, which is how it should be.


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