Ali Moore:
Adam Creighton is the chief economist at the Institute of Public Affairs. Adam, hello.
Adam Creighton:
Thanks very much for having me.
Ali Moore:
What if we had income splitting? A good idea?
Adam Creighton:
Well, look, it’s a reasonable idea. The main problem with it is it costs a lot of money obviously, because it blows a big hole in the tax revenue, but certainly from an ideological point of view, a philosophical point of view, it’s reasonable to treat the family unit as a family. Certainly socially, that’s how we treat families, and that would obviously enable one of the parents of a child, say, to stay home more readily, and of course, that will save money on public childcare costs, et cetera, because the family unit can spread that one income over two people. And of course, because of the tax-free threshold, et cetera, that basically spreads the taxation and so they could pay much less tax. So the US does it, other countries do it. As Matt Canavan said before, it can be done, but you mentioned One Nation proposed it, and of course they also have proposed a lot of spending cuts, and that’s the only way that the income splitting would be affordable.
Ali Moore:
Yeah. So I’ll get to that big hole that you say it would blow in the tax revenue, but just give us an example of where it would work. So let’s say you’ve got one partner earning $150,000 a year and another partner earning, say, $70,000 a year.
Adam Creighton:
Sure. So that would mean that the income will be summed up to 220, then it would be divided by two. So what’s that? 110, I think, and then each of the parents would be classed as earning 110. And because of the progressive nature of the tax system, that would mean that they each had a lower average tax rate. And that phenomenon is even more stark. Say you had one person earning 250 and the other person earning zero, then it would be a massive reduction in tax, because it would be 125 each, much, much lower average tax rate, and obviously, it would help that family greatly.
Ali Moore:
And I guess that has always been the argument against it, that it tends to favour the wealthy. Do you think that argument still holds?
Adam Creighton:
Well, look, the wealthy pay more tax, so anything that reduces tax in sheer nominal terms is always going to benefit those who earn more in the first place more. So that is true, but I don’t think to treat a family as a single unit necessarily favours the wealthy over poorer households. They would also be treated as a family unit. So I’m not sure that it necessarily favours the wealthy, but certainly in sheer dollars of tax saved, anyone on big salaries is going to benefit more. That’s true.
Ali Moore:
You’re listening to Adam Creighton from the Institute of Public Affairs, and on What If Wednesday this afternoon, we are asking what if you could split your income with your partner? Give us a call. Tell us whether you would like to see that change or whether you think it would not be a fairer system. 1300-222-774. So Adam, has there been … I’m sure there have been, someone’s crunched the numbers. What sort of a hole would it blow in the tax revenue?
Adam Creighton:
Look, well, there are various estimates, but it would certainly be tens of billions of dollars, which is a lot. It could even be more than that. It depends how people rearrange their affairs, so it’s very hard to estimate, but certainly-
Ali Moore:
But would it be offset by childcare costs?
Adam Creighton:
No, not fully. Somewhat, but certainly not fully. Because of course, there’d be lots of families who don’t have children, say, who would benefit. They’d say they’re a family obviously, husband and wife, say. And it’d be harder to do it just for those with children I imagine, although they could do it that way. I think wading into the politics, I think if the coalition wants to have a big bang tax policy, and of course Matt Canavan would like that, they need big bang savings to go with it.
Ali Moore:
Well, their shadow treasurer, Tim Wilson, wasn’t so keen as a priority. Interestingly, the One Nation policy does involve couples with at least one dependent child, so it does depend, doesn’t it, on whether you’re just doing couples or whether you’re only doing couples with children.
Adam Creighton:
Yeah, well, that’s right. So that would actually save considerable amounts of money. If you weren’t just allowing a couple without children to have it, that would massively minimise, but the reason all this is coming up I think gets to the whole cost of living issue. We’ve had a lot of bracket creep, and 15 years ago, something like 250,000 people were paying the top rate. Now it’s a million, so that’s a lot more taxpayers. The average tax rates are going up and so that’s why you’re getting proposals like this, as a way to get out of this income tax noose, because no other government in the world except Denmark relies more on income tax for its revenue than the Australian government.
Ali Moore:
Adam, interesting conversation. Do you think it will be on the table with either of the major parties? I’m wondering actually if I should put One Nation in the major party category now, but do you think it will be on the table with either the liberals or Labour or they’ve got other fish to fry?
Adam Creighton:
Well, certainly not Labour, but I think it’s got a 50% chance of flying with the coalition because they need something new. They need something big to reduce that massive gap in the parliament, and this would appeal to a lot of ordinary Australians, I believe.
Ali Moore:
And I’ve just got a text here, interesting question. What about a single person looking after two elderly parents? The question then, you couldn’t really speak your income if they weren’t taxed, or could you?
Adam Creighton:
Well, you could. There can be all sorts of creative ways about that. You could divide that amongst the three in some way. There could be limitations, but I think you’re right to point out that in an ageing society, there are a lot more cases like this than there used to be, so maybe the coalition will get creative and try to gazump One Nation.
Ali Moore:
Adam, thank you so much for being part of What If Wednesday.
Adam Creighton:
That’s all right. Thanks for having me very much.
Ali Moore:
Adam Creighton there from the Institute of Public Affairs.
This transcript with Adam Creighton talking on ABC Melbourne 18 March 2026 has been edited for clarity.
