New Zealand


  • Service: Tax
  • Type: Regulatory update
  • Date: 17/08/2010

Taxmail - Income splitting credit legislation 

Issue 4, August 2010


The Minister of Revenue has introduced a Taxation Bill proposing an annual “income splitting tax credit” for New Zealand resident couples (spouses, civil union partners, or de facto partners) that have primary responsibility for day-to-day care of dependent children aged 18 or under.


While the Tax Bill’s aim is laudable, we have concerns about the effectiveness of the proposal and how it fits with the broader tax policy framework (as endorsed by the Tax Working Group) and the findings of the Government’s Welfare Working Group.

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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


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:


Paul Dunne
Partner - Tax
Phone: +64 9 367 5991

John Cantin
Partner - Tax
Phone: +64 4 816 4518


Taxmail - Comment on topical tax issues from KPMG NZ Tax. 

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