In the spotlight today
Hon Peter Dunne: Taxation (Income-sharing Tax Credit) Bill First Reading Speech – 2010-09-27 10:20:21.486
I move that the Taxation (Income-sharing Tax Credit) Bill be now read a first time.
At the appropriate time, I will move that the bill be referred to the Finance and Expenditure Committee for consideration.
Income sharing for parents with dependent children has long been a core policy of UnitedFuture, and the introduction of this Bill forms part of our confidence and supply agreement with the National-led Government.
The income sharing proposals that this Bill introduces have been the subject of two separate rounds of public consultation, under two successive governments.
During the term of the previous Labour-led government, a Government discussion paper was released.
Again, this was part of a confidence and supply agreement commitment, and followed full consideration by the Cabinet.
The document canvassed people’s views on the idea of income sharing – an arrangement which allows couples with children the option to split their income for tax purposes so that each partner is taxed on an equal share of their combined income.
Because income tax rates rise according to the amount earned, under such a scheme parents could ultimately end up paying less tax if, for example, one parent works fulltime and the other chooses to remain home to care for their children.
Around 90 percent of the submissions on that first discussion paper were in favour of some form of income sharing on various grounds, including that it recognises the contributions of full-time parents in their homes and communities, and balances the assistance that is available to parents who are in the workforce.
I should acknowledge that at every stage of that process the previous government was constructive and helpful, and appeared to operate on a good faith basis.
All of which makes the Labour Party’s current opposition to this legislation that much harder to understand.
I constantly receive very positive feedback from everyday New Zealand families about Income Sharing.
New Zealanders are reacting to hip-pocket realities.
New Zealand families know that Income Sharing is good for them, and no amount of political double-speak from politicians who might oppose it will stop them from recognising when something actually benefits them.
The reality is simple: up to 310,000 New Zealand families stand to benefit by anything up to $9.000 a year and have the choice of spending more time raising their children.
And the key word here is ‘choice’.
Those who would oppose this Bill are in effect saying they wish to deny New Zealand families a very helpful choice in the way they wish to raise their families.
The second consultation round took place in December last year during the term of the present government, in which feedback was sought on how income splitting might be delivered as an annual tax credit, similar to Working for Families assistance.
Again, most submitters supported this approach.
So the bill introduced today reflects public feedback from both consultation rounds and sets out who would be eligible, how the tax credit will be calculated and the rules around how to apply for the credit and how it would be paid.
I particularly acknowledge the support of both the National Party and the Maori Party during the development of this legislation, and for its first reading today.
The provisions of this bill have the potential to benefit up to 310,000 families, and over three quarters of all New Zealand children.
In essence, under an income-sharing arrangement, each partner in a relationship caring for dependent children under 18 years of age would be taxed on an equal share of their combined income.
At the end of the tax year they would be able to apply to Inland Revenue for a tax credit, based on the difference between the amount of tax they would have paid on an individual basis and what they would pay based on half of their combined income.
Members will have noticed that I use the term “income sharing” rather than the term income splitting used during consultation.
Adopting the new term income sharing has been a deliberate choice.
First, it is a term that more accurately reflects the status of couples with children as equal partners in raising their families, and secondly, it provides a more accurate description of the arrangement in law.
The bill defines parents as being spouses, civil union partners or de facto partners, similar to the Working for Families legislation.
They would have to be New Zealand tax residents for the whole tax year before they could claim a tax credit, and one of the partners would also have to be the principal caregiver for the dependent child or children.
Under the provisions in the bill, the shared care credit would also be available to parents when they have separated if they have subsequently repartnered and are sharing responsibility for caring for their child for at least one-third of the tax year.
While the income sharing arrangement has the potential to benefit many families, it cannot, and is not intended to be, a suitable arrangement for all couples with children.
For some, depending on their income, the option to claim the credit will be of marginal value.
Nor will the credit be available for certain parents who do not meet the eligibility criteria, such as sole-charge parents.
I am aware there will be some who will view this aspect of income sharing as an infringement on human rights.
Some members have also no doubt observed the report from the Attorney-General under section 7 of the New Zealand Bill of Rights Act that accompanies this bill.
On this matter I would like to make an obvious point: that there is no one benefit that fits all.
That is why we have targeted assistance for groups with particular social and financial needs.
Arrangements are already in place for people who are sole-charge parents, for example, through the childcare subsidy, the minimum family tax credit, childcare rebate and the domestic purposes benefit.
But for many families income sharing recognises the real financial choice that many couples with children often have to make about whether they both work full-time and employ others to care for their children, or whether one partner stays home to care for the children, possibly on a part-time basis.
The proposals in this bill will give parents more choice about their work and caring roles.
Mark Stewart | Press Secretary | Office of Hon Peter Dunne
Minister of Revenue | Associate Minister of Health| Member for Ohariu
DDI +64 4 817 6985 | Mb +64 21 243 6985
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