So, you`re on $60k. Income splitting for tax purposes could assist in getting you $5450 for having a child

So, you're earning $60,000, live with a partner who is not working. You have no kids. Money's tight and the Government has just passed a law allowing for income splitting for tax purposes. You`d like some more money without working additional hours.

Have a child and split your income for tax purposes. United Future is promoting a discussion document on it's income splitting policy. This document is a direct result of a commitment made in the confidence and supply agreement between Labour and United Future.

The Child Poverty Action Group, in its case for opposing income splitting notes that a household with a single earner on $60,000 can save $3,217 per year from 50/50 income splitting. However, a household on $36,000 stands to gain only $570 per year. That is, a family on just over half the income gets less than one fifth as much tax relief, and therefore this policy favours high income families and confirms to non-earning partners that if they choose to stay home to mind kids that United Future considers their economic worth is dependant on their partners income. A former cleaner whose partner is earning $60,000 will get 500% more tax relief than a stay at home accountant who whose partner earns $36,000, thus widening the gap between richer and poorer families. If one partner earnss $30.000 and the other $10,000 they`ll get nothing from income splitting.

But you`ll actually get $5450 a year extra if you are on $60,000 and have your first child. This is made up of $2236 Family Support and $3,217 that you'll save from income splitting for tax purposes, which will not be available to childless couples. However if you earn $36,000, you`ll get 72% more: $7072 in Family Support and $570 a year in income splitting.

The policy on its own favours high income families just as WFF favours low income families. And given that low income families are still struggling, even with WFF payments, an income splitting policy merely widens the gap between the rich and the poor. This is despite the fact that a tax splitting policy minimises the individual basis of our tax system and lowers marginal tax rates for higher incomes.