Vol. 546 No. 3
160 Ms O. Mitchell asked the Minister for Finance if, in the case of cohabiting couples, tax free allowances can be transferred to the other partner in the case of one partner becoming unemployed due to the fact that each partner's income is recognised and assessed as means in assessing eligibility for unemployment assistance payments. [31388/01]
The tax treatment of unmarried couples who cohabit is that each partner is taxed as a single person and each is entitled to the tax credits and standard rate band appropriate to single persons. Consequently, as each partner is a separate entity for tax purposes, credits and reliefs cannot be transferred from one partner to the other. The position of married couples in relation to income tax is accorded recognition through the married person's tax credit and the home carer tax credit. The latter credit was introduced in the Finance Act, 2000 in respect of those spouses of married one income families who work in the home caring for children, the aged or incapacitated persons. It may be claimed by a married couple who are jointly assessed for tax and where one spouse, the home carer, cares for one or more dependant persons. The home carer credit cannot be claimed by cohabiting couples, as individuals who are not married cannot opt for joint assessment.
I initiated in budget 2000 the process of widening the standard rate income tax band. When the process is complete the position of all couples will be the same with respect to the standard rate tax band. Every income earner will have his or her own non-transferable standard rate tax band regardless of marital status.
The issue of the tax treatment of cohabiting couples was examined in the report of the working group examining the treatment of married, cohabiting and one parent families under the tax and social welfare codes. The group, which was established by the Minister for Social Welfare in May 1997, reported in August 1999 – the report is available from the Government Publications Office. The group was sympathetic, in principle, to changes in the tax legislation to address the issues raised relating to cohabiting couples and reported that the options that it set out should be considered further.
