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Family income splitting facility welcomed by Taxation Institute

Publication date: 04 Aug 98 | Source: THE TAX INSTITUTE

The Taxation Institute of Australia is heartened by rumors that are circulating that families may be able to split incomes between household members to reduce their tax burden under the Coalition tax package, according to Taxation Institute President, Ken Spence.

"The Taxation Institute suggested this reform to the Government in March of this year and is very pleased that the Government may have heeded concerns of the Institute," Mr Spence said.

"The introduction of voluntary household tax returns would result in effective tax cuts for families. Similar systems are in place in other jurisdictions such as France, Germany and the USA. Depending on the detail, such a measure should be very popular with taxpayers because it is more equitable than the present system."

"It is also likely to be popular because it would indirectly create an environment where setting up complicated minimisation strategies would no longer be attractive for most families," he said.

"As more taxpayers find themselves in the top tax bracket (20% of taxpayers in 1998 compared to 1% of taxpayers in 1970) an increasing number of individuals are seeking to enter into salary sacrifice and income splitting arrangements in an attempt to reduce their tax. However, not all taxpayers have the capacity to enter into such arrangements, nor should they need to."

"Under the joint tax return proposal, most families will benefit. It is also likely that household income splitting will cause much existing aggressive tax planning to wither on the vine," Mr Spence said.