Leah Blyth (SA, Liberal Party, Shadow Assistant Minister for Stronger Families and Stronger Communities) Share this | Link to this | Hansard source

Right now Australia's hardworking families are being left behind. Under Labor the cost of living is rising faster than wages. Too many families feel like they're working harder and not getting ahead. People who make the difficult but deeply personal decision to work part time to raise their children, support ageing parents or children with a disability or special needs, or just keep the family show on the road are quietly punished by a tax system that doesn't see them. It's time we had a serious conversation about how our tax system treats families.

Australia's personal income tax system doesn't just raise revenue; it sends a message about what we value. Right now that message is outdated and unfair to those who structure their lives around caring for children, elderly parents or loved ones with a disability or special or additional needs. Imagine two families earning a combined $160,000 a year. In one, both parents work full time and earn $80,000 each. In the other, one parent earns $120,000 while the other works part time and earns $40,000, perhaps to handle school pick-ups, provide care for a toddler or support a child or elderly parent. Under our current tax system the second family pays more tax. Why? It's because our tax system treats individuals in isolation, rather than recognising the shared reality of household finances and caregiving. This is where household income aggregation, also known as income splitting, comes in. It allows a family to be taxed based on their combined income, with tax brackets applying to the average income per adult. It's a small administrative shift that would make a big difference for fairness and better reflect the way modern families live in Australia today.

Australia's system of individual income taxation takes no account of whether someone is supporting a household of one or a family of five. That means the more uneven the income split between partners the more tax the household pays overall. A family where one parent reduces hours to care for children or loved ones is punished financially, paying more tax than two full-time earners with the same total income. This isn't just about traditional single-income families; it's about modern families, where one partner goes part time to juggle parenting duties, support ageing relatives or just maintain a cohesive home. It's about giving households the freedom to decide what's best for them, without being pushed into a one-size-fits-all model by a cold and indifferent tax code.

Under the aggregated system, that $160,000 total income could be treated as two $80,000 shares, regardless of how the earnings are split. It doesn't mean families pay less just for being families. It simply ensures that caregiving, whether full time or part time, isn't penalised. At its core it's about fairness. Care work, whether it's raising children or supporting elderly parents, is real work, but, unlike paid work, it's not recognised in our tax system. Household income aggregation would give proper value to those contributions by reflecting the shared financial responsibilities within a household. It would also enhance flexibility. Right now the system creates a sharp disincentive for secondary earners—usually women—to work more hours. Even modest income increases can push families into higher tax brackets or result in benefit cuts. Aggregating income would smooth these cliffs, making it easier for families to decide what combination of paid work and caregiving suits them best.

Critics say the reform would be too complex or unfair to singles, but household aggregation could be made voluntary. It wouldn't affect those who prefer separate finances or who want to file as individuals. This isn't about creating winners and losers; it's about recognising the diversity of how Australians live. Working parents, carers, part-timers, stay-at-home mums and dads, shiftworkers—our tax system should respect them all.

As the financial pressure on families grows, it's time for a tax system that backs the quiet heroes—those who put family first. The current government will not fix this problem. The Liberal Party believes we must reward effort, respect choice and provide a fair go for families. A tax system that recognises caregiving is central to delivering a fairer future for Australia's families and building stronger communities.

Senate adjourned at 19:40