Couples with children would receive up to $2,000 a year extra income under taxation changes proposed by Queensland Senator Matt Canavan.
“Our tax and welfare system has tilted the playing field too much against parents who choose to stay at home and look after their children,” Senator Canavan said today. “It is inefficient, unfair and ignores the development benefits of stay-at-home parenting for children.”
In a formal submission to the current Commonwealth Government discussion paper on taxation, Senator Canavan has recommended a limited form of income-splitting that would produce a tax benefit capped at a maximum $2,000 a year.
“In this proposed reform, the primary income earner could transfer income equal to $18,200 less the income earned by the second income earner. If the second income earner earns more than $18,200, no transfer of taxable income would be possible.
“For example, a family with a primary breadwinner earning $65,000, and a secondary earner on $15,000, would be able to transfer $3,200 from the primary to the secondary earner for the purposes of tax calculation – delivering a tax benefit around $1,100.
“A couple on the same total income of $80,000, but with the primary earner being the sole breadwinner, would be able to transfer the full amount of $18,200 and receive a capped tax benefit of $2,000.”
Senator Canavan said this reform would deliver tax relief to 815,000 Australian couples.
Costings prepared by the Parliamentary Budget Office indicated it would cost in the order of $1.5 billion a year.
“This policy could apply from 1 July 2016, with couples able to claim the credit when they file their 2016-17 tax returns,” he said.
“The proposal would be unlikely to impose large transaction costs or be administratively difficult. The tax system already allows joint assessment of income for family tax benefits and this proposal could simply use existing system to judge whether the transfer of up to $18,200 would be beneficial.
“Individual families most likely would not need to do anything additional on their tax returns, the calculations could instead all be done by the Australian Tax Office using existing information provided.”