Under the proposed credit, a couple’s combined income would be split on a 50/50 basis and personal tax rates would be applied to each income, to calculate the tax payable under income splitting.
A tax credit would then be provided for the difference in tax payable before and after income splitting for each partner.
The Tax Bill and commentary are available at www.taxpolicy.ird.govt.nz.
The attached taxmail analyses the proposal.
We are concerned that income splitting is proceeding despite:
- serious questions being raised by officials on the targeting of the proposal (higher income households will benefit most)
- the impact on work incentives for caregivers (primarily women)
- the fiscal cost (if passed income splitting will be 45% of new Government spending).
If you have any questions on the above, please speak to your usual KPMG advisor or contact: