Consequential changes

(Clause 8)

Summary of proposed amendment

A person who receives an income-sharing tax credit, or a portion of it, will not be eligible for the Independent Earners Tax Credit as this would undermine the purpose of both policies.

Application date

The provision will apply from 1 April 2012.

Key features

Section LC 13 (Tax credits for independent earners) will be amended so a person cannot claim an Independent Earners Tax Credit (IETC) if they also receive an income-sharing tax credit.

If a person had received an IETC during the year and then applied and received an income-sharing tax credit at the end of the tax year, they would no longer meet the eligibility requirements for an IETC.

Background

The IETC was introduced in 1 April 2009 to provide a tax credit to people earning between $24,000 and $48,000 in circumstances where they do not receive any other form of Government assistance such as an income-tested benefit or pension, and where they are not entitled to a Working for Families tax credit.

The income-sharing tax credit is similar to the Working for Families tax credit in that it is a tax credit to provide additional support for couples with dependent children. Therefore, a person will not be able to receive both the new income-sharing tax credit and an IETC. They would need to pay tax equivalent to the amount of IETC they had received.