Dáil Éireann Debate, Wednesday - 6 October 2004
170 Mr. Boyle asked the Minister for Social and Family Affairs if representations have been made by her and her Department to the Department of Finance regarding the taxation of maintenance payments, in view of the extent to which single parent families often rely on such payments. [23397/04]
Amharc ar fhreagraMatters of taxation policy and implementation are the responsibility of my colleague the Minister for Finance. Similarly, maintenance provisions — particularly where they involve court resolution under family law — are primarily the responsibility of my colleague the Minister for Justice, Equality and Law Reform.
My Department provides income support where necessary to unmarried and separated parents through one-parent family payment, on a means-tested basis. The need for this income support arises mainly where lone parents have been unable to obtain adequate — or perhaps any — maintenance for themselves and their children from their spouses or partners. One of the conditions for eligibility for one-parent family payment places an obligation on applicants to make appropriate efforts to obtain maintenance from their spouse or partner by a mediation process or through the family law courts.
My Department also has powers under the liability to maintain family provisions of the Social Welfare Acts to pursue the liable relatives of one-parent family payment clients to obtain a contribution towards the cost of the social welfare income support provided to the families concerned.
Representations were made to my predecessor in September last on the question of the general tax treatment of maintenance income for separated people. The issue raised in these representations was that maintenance received by a separated person should be exempted from income tax, or at least taxed at the standard rate. The representations were based on the situation of a named individual separated person who is not a social welfare client and there was no particular social welfare context.
In responding to these representations, the then Minister for Finance confirmed the position that maintenance payments received under a legally binding agreement are taxable in the same way as any other income. Tax relief is provided for the person making the payment if it is made under a formal maintenance agreement or court order. Informal or non-legally binding maintenance payments made between a separated couple are neither taxable for the recipient nor tax-exempt for the donor.
Also, if the separated couple jointly elect to be taxed as if the separation had not taken place, maintenance payments are not subject to tax or to tax relief.
In relation to social welfare, maintenance payments received by clients on one-parent family payment are assessable as means. However, there are disregards where lone parents have mortgage repayment or rent commitments on their principal residence. Half of the balance of maintenance received is exempted for means purposes. These measures were introduced in the social welfare code to provide a financial incentive to lone parents to seek maintenance support themselves. There are no plans to change the current arrangements in this regard.
