Australia’s income tax system should be made more “family friendly”, according to Queensland Senator Matt Canavan.
“The situation now is that families with a single breadwinner are disadvantaged compared with families where both parents have paid employment, mainly through the tax-free threshold,” Senator Canavan said.
“Figures from the Parliamentary Library indicate a single-income household earning $120,000, for example, now pays around $10,000 more tax than a double income family with the same joint income of $120,000. The disparities carry on across various income levels.
“To address this, Australia should introduce a capped form of income splitting similar to 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.
“I am suggesting that total tax relief per couple be capped at $2,000 a year. The program would deliver tax relief to upwards of 700,000 families.”
Based on costings provided by the Parliamentary Budget Office (PBO), the cost of this policy would be in the order of $1.5 billion a year, Senator Canavan said.
“While this costing looks to be on the expensive side, the scheme could be restricted to families with only a single income or with children younger than school-age,” he said. “We have a tight budgetary situation but our families package should look after all families, including those with a stay-at-home parent.”
Senator Canavan described Australia’s income tax system as one of the most hostile in the developed world for single-income families.
“Around half of all developed nations allow some form of shared tax arrangements ,” he said.
“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.
“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.”