Dáil Éireann Debate, Tuesday - 4 April 2017
49. Deputy Maureen O'Sullivan asked the Minister for Finance the policy objectives that are achieved by rendering the carer's allowance, which is already subject to a means test by the Department of Social Protection, subject to taxation; if other social assistance payments are treated similarly; and if he will make a statement on the matter. [16406/17]
Amharc ar fhreagraCarer's Allowance is a means-tested payment for carers who look after individuals in need of care and attention on a full-time basis. The Carer's Allowance, in common with many other social welfare payments, is regarded as a taxable source of income. The level of tax payable, if any, on such income is then determined by the personal circumstances of the recipient, taking into account factors such as the individual's other sources of income and the available tax credits and standard-rate bands.
The means test for the Carer's Allowance involves assessing an individual's means based on income and assets other than their home. I am informed by the Department of Social Protection that the means test for carers allowance has been significantly eased over the years and is now one of the most generous means tests in the social welfare system, most notably with regard to the earnings of the carer's spouse. The income disregard is €332.50 per week for a single person and €665 per week for a couple. This means that a couple with two children can earn in the region of €35,400 and still qualify for the maximum rate of carer's allowance as well as the associated free travel and household benefits package.
As Deputies will be aware the Irish income tax system is highly progressive with those on lower incomes paying proportionately less tax than those on higher incomes. Therefore the reality is that an individual who is in receipt of a means-tested payment will in many cases not have an income tax liability as the available tax credits will reduce any tax liability to nil. A person in receipt of taxable social welfare income may claim the PAYE tax credit of €1,650 per annum, in addition to his or her personal tax credit of €1,650 per annum. These standard tax credits can shelter income of €16,500 from tax at the standard rate each year.
A jointly assessed individual who works primarily in the home to care for an incapacitated person may also qualify for the Home Carer tax credit of €1,100 per annum. When added to the personal and PAYE tax credits, this would shelter income of €22,000 from tax at the standard rate each year.
It should also be noted that social welfare payments are exempt from USC so, in addition to no USC liability arising on this income, it is also not counted as income for the purposes of determining whether the USC entry threshold has been reached.
