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Tax Splitting for Australia’s Working Families?

By March 27, 2017No Comments

By Elinor Knaggs

Australia’s tax system has been criticised as being out of touch with the reality of working families. Around one million families in Australia rely mainly or completely on one income, more commonly in regional areas. This is often the case where one parent might take care of any children and the family home full time, while the other parent works. However, Australia’s current tax rating system does not seem to take this into account.

Senator Matt Canavan gave this example of how the current system affects working families:  A family with two children, where both parents work full time and earned $60,000 per year each, would pay tax assessed at about $24,000 per year. We Can compare this to a family with two children where only one parent has an income, earning $120,000 and paying about $34,000 in tax. Both families have the same overall income, yet the single income family will pay $10,000 more in tax. This gap occurs because a family with two incomes also has access to two tax-free thresholds, while a single income family only has access to one.

Unlike many similar legal systems, Australia does not have a tax splitting system. Where one partner is the main or sole financial contributor, such a system would allot part of their earnings to the other partner, so that each pay less tax. In 2015 Canada introduced capped tax splitting where families had dependent children, allowing those families to access the same tax-free thresholds as families with two incomes. Should Australia’s tax system recognise that the income of a family, no matter whether it comes from one or two people, is shared between all members


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