Liberal recommends income splitting

Income splitting was a better long-term solution than paid maternity leave to supporting families, federal Liberal MP Sophie Panopoulos said.

Ms Panopoulos said income splitting - which would allow couples to split one income for taxation purposes between both parents - would give families choice on whether a mother should return to work.

But Sex Discrimination Commissioner Pru Goward said income splitting was regressive, too expensive and favoured the rich.

Ms Panopoulos, a backbencher for the regional Victorian seat of Indi, said Ms Goward's proposal for 14 weeks' paid maternity leave was a short-term solution and gave families little option of a mother staying at home long term to raise a family.

"The issues and the financial burdens and the other problems of raising a family extend way beyond 14 weeks," Ms Panopoulos told ABC television.

"Too many government solutions over successive years have been a hand-out mentality. Tax and spend.

"This (income splitting) is basically saying give families back some of the tax they pay so they can decide how to use the money themselves."

Ms Goward said the basic problem with income splitting was that it favoured very high income earners.

She said it gave a family earning $200,000 a year a great incentive for the mother to stay at home but little motivation for a family bringing in $30,000 a year.

Income splitting would allow couples to split one income for taxation purposes between both parents, giving them significant tax savings.

"It favours very well-off (families) and certainly gives that woman an incentive to stay home," Ms Goward told ABC television.

"In addition to that I don't think it addresses those first 14 weeks.

"Nobody has ever said that paid maternity leave is the only answer to the incredible time crisis that Australian families are facing but you have to start by saying to all Australian mothers: `Whether you work or not your baby is entitled to have you for at least the first 14 weeks'."

Ms Panopoulos said paid maternity leave made the assumption it was best for a mother to return to work after giving birth.

"What I'm saying is, mothers should have the choice ... and the flexibility to stay at home and the main reason why many women are forced back into the workforce is financial and income splitting relieves that financial pressure," she said.