YOUNG families are hoping for an overhaul of individual income tax in favour of a system which rewards stay-at-home parents.
But critics of a European style income splitting model, which involves taxing a household as a whole, argue that it would also benefit high-income earning families and disadvantage singles and working couples.
The proposal is expected to be examined in Treasury Secretary Ken Henry's review of the Australian taxation system which will be released on Sunday.
A pile of submissions to the Henry review are in favour of taxing households rather than individuals which is currently the case.
"Australia's tax system should reflect the economic and social reality of today's society and treat 'working families,' such as married couples, as a single unit rather than as two separate taxpayers for some purposes," taxpayer Marc Johnston said in his submission.
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He said introducing income splitting would be an "equality measure".
But Sydney University senior research analyst Michael Rafferty said an income splitting system would primarily benefit single income earners with children at home.
"Conceptually it's got some good things about it, but unfortunately the devil is in the detail, because it can either work to be a more equitable system or it can just as easily help high income earners by allowing them to split incomes off," Dr Rafferty said.
Dr Rafferty, who works at the university's Workplace Research Centre, said the current tax system was unfair for a second lower income earner in a household.
"It's inequitable and sometimes it acts as a disincentive for second income earners to work at all," he said.
"But if you're a super rich middle class family and you only need one income, splitting income then can be quite inequitable."
Another submission to the Henry review calls for the income splitting scheme to replace the Family Tax Benefit part B which assists families with young children.
"I would like the review panel to consider ways of giving fair tax relief to single income families, with one parent staying at home to care for the children," Peter Coard said in his submission.
Others claim income splitting eases the burden on single income households and allows "more parent/child contact".
"As a one income household we are subject to disproportionately high rates of income tax compared to a single person, or a household where both partners work," Mike Hammer said in his submission to the review.
He said his net family income would be greater if he and his spouse worked in unskilled jobs and spent less time with their children.
Meanwhile, a young professional couple with two young children, who did not wish to be identified, said the current system led some families to transfer assets into the lower income earner's name and did not encourage couples to care for their children at home.
The results of the Henry Review will be published at 2:30pm AEST on Sunday.
Local incomes show modest growthOpinions vary on Henry tax review advice
