Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill

We come to Part 4—the debate on clauses 221 to 276, “Amendments to other enactments”, and Schedules 3 and 6.

Thank you, Madam Chair. There’s a lot in Part 4, and there’s some quite important stuff. I think perhaps the most important bit is around the KiwiSaver enhancements. As we all know, KiwiSaver is a vital part of that picture towards New Zealanders saving for their retirement. So we have got the New Zealand Superannuation Fund—about $39 billion in its accounts, and obviously being managed incredibly well. The average return is, I think, about 10.3 percent since it was established, and it’s doing a great job in terms of helping the Government meet its requirements for paying out New Zealand super.

The other side of that, of course, is the KiwiSaver accounts that, hopefully, virtually everyone has. Of course, we had the incentive to incentivise people to join KiwiSaver accounts, that if people put in enough money, they would get $1,000 on the initial joining fee, and, of course, people are entitled to just over about $1,059, from memory, provided that they meet the minimum contribution every year. So that contribution that the Government provides to KiwiSavers in New Zealand is a very, very important tenet. Again, the KiwiSaver accounts—roughly a $40 billion account, and growing, and we need to get people to save.

The simple fact is that not enough New Zealanders are saving. In fact, there are from memory about 2 million people involved in KiwiSaver, of which about 500,000 are not contributing or, in broad terms, are on a contributions holiday, and that is simply not good enough. In the work that I’ve done, I think that the average balance sitting in KiwiSaver accounts is about $26,000. That, as an independent piece of wealth that people can access when they retire, is simply not enough, and we need to do more, and part of this bill is about dealing with that.

The Retirement Commissioner’s work on this issue was fundamental. She looked at a couple of scenarios under the current payment of what you’re entitled—roughly, about $23,000 for a single person, rising to $28,000 for a couple—and said, “Could you live on that, and what more would you need to live on to live in different scenarios?” One of the scenarios was a very modest living standard, obviously with no overseas trips—very modest living standards—and that showed that, basically, you needed about another $100 a week. That was a “no-frills budget”, I think she called it, and then there was another category, which was a more generous lifestyle, if I can use that term.

What it showed is that, for most people, they need between about a couple of hundred thousand and up to $700,000 of additional assets to be able to live comfortably in their retirement. That’s a substantial amount, and I think the average was closer to about $360,000. Of course, with New Zealand, with its trending population, we’ve got the baby boomers hitting that retirement age—or if they haven’t already, they’re certainly getting very close to it—and the demands that will have on the New Zealand Government to be able to meet future superannuation payments and also to make sure that those people going into retirement can actually pay and have a quality of life that we in New Zealand expect.

So with that KiwiSaver, as I said, the balance is very low, and it’s very important that we actually get people turning their minds toward this whole issue. Personally, I don’t think New Zealanders are focused enough on it. I think that with that sort of liability that’s coming towards us, overlaid with health costs that are very significant—and our current health budget is about $16 billion at the moment. As people move into retirement, the last two years of their lives are when, by far—and I forget what the percentage was; I think it was something like 80 percent of your total health spend occurs in the last two years of your life. So these changes around KiwiSaver enhancements are vital, and these are covered in clause 216 and clauses 231 to 237.

I think probably the most important thing—there were five actual elements that were incorporated in the changes that we want to do to KiwiSaver, and I’ll just go through them. I think the best thing is introducing to KiwiSaver alternative contribution rates. So I think most people will be aware that 3 percent is the current contribution rate. We have 3, 4, and 8—8 is the max—and so what this bill does is it introduces a category of 6 percent and 10 percent. So now you’ve got an entire suite that takes you from—and this is a choice for individuals—3 percent to 10 percent of your contribution from your salary.

We’ve filled in the gap because the gap between the lower band and the higher band was too big, and so, by far, most people invested at the lower rate of 3 percent, and by the time you get to 8 percent, there is a very, very small portion of people who are taking that from their earnings and putting it into their KiwiSaver. Of course, there’s a contribution required from employers, matching that contribution, which is very, very important. So that 6 to 10 percent is a fundamental change and, I think, a very good change.

The second thing is reducing the holiday—and I talked about this just a moment before, about the maximum contributions holiday. At the moment, the legislation has always assumed that you could opt out from contributing to your KiwiSaver for a maximum period of five years, and in most cases, many people have opted out for five years—and I talked about those 500,000 who are not currently contributing. What happens is they just get into a zone. They don’t think about KiwiSaver, and suddenly time has passed and they haven’t contributed. The thing about saving for your retirement is that the earlier you start doing it and the more consistent you are in terms of saving, the better the outcome through just the compounding impact of money through earning interest on interest, and that is the essential stuff.

I think one of the other categories that’s probably missing in the KiwiSaver debate is business people. In many cases, they are owner-employers. They own their own businesses and they’re their only employer—and employee, in that case. Many of them are not contributing to KiwiSaver, and it’s quite a hole in terms of the whole debate. But this contribution holiday is now going to be set at a year, so if you want to roll it over, you’ve got to make a conscious decision at the end of the 12 month period whether you want to take another year’s contribution.

I think the whole thing about a contribution holiday is wrong—it’s wrong. It’s not a holiday at all, because you’re actually saving for your own future, and so some of the nomenclature has been changed. We’re now talking about a “savings suspension”, which really means that you’re not saving for your future. It’s a small change, but it’s very, very important, and I think it’s one that sort of recognises that the real issue is that you need to save for your future. If you’re going to have a meaningful and worthwhile lifestyle that you want and anticipate when you’re in your retirement—

I apologise to the member. The time has come for me to leave the chair for the dinner break.

Sitting suspended from 6 p.m. to 7.30 p.m.

💬 ANDREW BAYLY: Thank you very much, Mr Chair. Just before the break I was, obviously, going through the changes to KiwiSaver, and they’re quite significant. I identified there are five substantial changes in the amendments or enhancements to the KiwiSaver arrangements. The first one was including a new contribution rate of six, and also 10, percent; reducing the maximum contribution holidays from five to one year so it forces people who want to stop contributing to their KiwiSaver to actually have to make that election to not do that every year, rather than every five years; and changing the name from “contribution holiday” to “savings suspension” because, effectively, people are stopping actually providing for their future retirement.

The other thing I just now wanted to touch on, in the last little bit of my speech, is the issue around the 65-year-olds opt-in clause of KiwiSaver. I think I’m going to have a colleague who’s going to follow me on this—but it’s vital; if you look at New Zealand, we need people who can invest in vehicles that can help them continue to grow their investments right through their retirement. And the issue around KiwiSaver; it is a cost-effective way to do that and the amendments facilitate that for over-65s. In my view, it’s a great thing, and, hopefully, my colleague’s going to pick up on this.

Thank you, Mr Chair. Well, I’ve been told what to talk about, so that’s easy. I wanted to add to the time that Andrew Bayly’s been talking about KiwiSaver, because it’s an interesting issue, and the issues raised in the changes are also interesting.

But just before we get on to that, I want to talk about a side issue, really, in that during the course of the submissions on this bill, we had a youngish man and his mother come and talk to us about, in essence, the disability community and the fact that they may not live for ever and the ability of that person to then withdraw funds early. I know it’s not part of this bill right now, but it very much applies to what was talked about here, and it is an issue that I think—it’s a difficult issue, but it’s an issue that we’ll have to address as a Parliament in due course. His submission was really around the fact that he’d put money into KiwiSaver, he wanted to do some things in his life, and he felt he may not live till he was 65 to withdraw it. That’s quite a challenge. Interestingly, through our electorate offices we get a lot of inquiries about KiwiSaver and the ability of people to be able to, I guess, take some funds and use them to keep themselves alive. My colleague Andrew Bayly talked about it briefly before, and I think it’s probably a rule that needs to be upheld very strongly, because things that happen to you short term change, and they change quickly, and I think it’s essential that people build up savings for later in their lives.

You see often in life people who have opted out of superannuation schemes, or, in this case, KiwiSaver, and then later on in life have no option but to live on whatever the Government provides them with, and I think that’s a little bit tragic. I’m very keen on allowing over-65s to opt in to KiwiSaver. It would’ve been quite good if this had been around right from the start, actually, because it would have made a difference—

💬 Hon Stuart Nash: Bit of self-interest there.

Well, to be fair, I’m a little bit past that, but, none the less, I do have a KiwiSaver account, and I’m very pleased I do. So I think that’s a very good option as well, and, of course, we’ve got people over that age who work for years and years after that, and we’ve got employers who value the contributions that those people make to their businesses and certainly will continue to pay their share of that contribution. That was an issue that was also discussed in the select committee stage of this bill. It wasn’t made compulsory, as it turns out, but I think it’s an option for later on as well. So there are some issues with that that I think are very positive. I won’t talk about the contributions holiday, although I have talked about it briefly, because my colleague Andrew Bayly talked about that for quite a while during his comments on the bill.

I’m also very keen on the additional KiwiSaver employee contribution rates, because I think that’s an option, again, that people can use, and it’s a very valuable option to have. I think, interestingly, I’ve always been a bit of the view that I kind of like compulsory superannuation, or a sensible compulsory superannuation. I go back, and I would be one of the few left in the House who would remember the days of—well, it was almost a day actually. We had only a couple of days of compulsory superannuation, but we had the option to run private schemes or public schemes in those days. When that was cancelled, most people cashed up and went. Imagine what New Zealand would look like now had a different decision been made at that time, because it would have been very significant. I think the great value of KiwiSaver or whatever might be introduced in the future is that it encourages people to save and it makes quite a significant contribution to our economy from an investment fund point of view. Again, Andrew Bayly mentioned the amount of money that was involved in that, and it’s very significant.

I think the other thing that lots of KiwiSaver investors talk about and probably don’t really have a good understanding of is the risk of the drive to get more and more money invested in New Zealand through the KiwiSaver schemes. That actually is quite a high risk, because we do have to have a diverse investment portfolio to make sure that in times of difficulty—and they come about pretty frequently—that investment is protected, because I think it’s most important that we put as much protection around KiwiSaver schemes as we can without, I guess, being too arbitrary about them.

So I’m very keen on the KiwiSaver changes and that would be my contribution to that part of the bill.

Thank you, Mr Chair. I have a question for the Minister specifically on the KiwiSaver contributions. I refer back to the fundamental intention of even having a KiwiSaver in the first place. It’s that with people saving for their retirement, principally they are the beneficiaries of those retirement savings but society also gains some benefit from reducing pressure on potential top-ups and other supports that people might otherwise require in their retirement if they didn’t have enough of their own resources to spend. So I commend the Minister for adding the 10 percent contribution level in there, because if people are able to put aside that much of their pre-tax income every pay cheque, then I think it’s a very good thing, should they choose to want to do that, that the State makes it easy for them to do so, and ultimately they will benefit incredibly well, one would expect, from that and the State also gets some level of benefit out of that too.

Then I look at the 6 percent, which is clearly a newly added piece, and the natural interpretation one would make is it’s there for someone who can’t quite afford 8 percent but could afford more than 4 percent. Again, that seems extremely reasonable. The extra contribution they make will provide benefit principally to them but also, we can argue, to some extent to the State and other New Zealanders. But that leads then to a question, and the question is: if the whole principle of KiwiSaver is we want people saving for their own retirement because of the personal benefits but also societal benefits, wouldn’t it be better for us to be able to have a regime where as many people as possible have the confidence that they could participate and did so? So the simple question there would be: why, Minister, did you not introduce a 2 percent contribution level?

💬 Hon Stuart Nash: There is already.

Well, not according to this legislation, Minister, there isn’t. So if people can’t afford a lower level but could perhaps stretch themselves to 2 percent, that could be the difference between a contributions holiday and making a small contribution into their KiwiSaver. We could all argue, therefore, that we would expect that more New Zealanders would be likely to actually take up the option and to continue to contribute because the legislation in clause 234 points out that “In section 64(2), replace ‘3%, 4%, or 8%’ with ‘3%, 4%, 6%, 8%, or 10%’.”—because, clearly, 2 percent is not currently an option. But I think it would be a good thing. I’d love to hear the Minister’s view on this, but I think it would be a good thing if we could find a way to accommodate those people for whom 3 percent or more seems a stretch to them, possibly due to other commitments they have, possibly due to some uncertainty about future mortgage rates, or some uncertainty about costs of living or costs of raising children—whatever their particular circumstances may be. If we have a situation where there are New Zealanders who are simply saying, “Well, 3 percent is a little bit of a stretch for me.”, wouldn’t it be a good thing for them and a good thing for New Zealand if we could find a way to bring them into the scheme as active participants, particularly people who might currently be on a long-term contributions holiday—or even if they were, with this law change to therefore have to revalidate that holiday each year, they could still do so.

So, Minister, I’d like to hear from you whether you would consider that change. It’s a pretty easy Supplementary Order Paper, I would think, to add even at this late stage. We could just add it in. A few more people on the scheme is a good thing. Obviously, I would suggest that the Minister would want to limit the employer’s contribution under the scheme. They wouldn’t be expected, I think, to contribute more than that; although he might have comment on that as well. He might actually feel that there is an argument that could be made that just because the employee is in circumstances that would permit themselves contributing only 2 percent of their pre-tax salary that perhaps their employer—because they won’t change their employment conditions; they won’t change their wage packet. If the employee can’t afford the extra amount, there is potentially an argument that the employer still could. So, Minister, I leave my contribution at this stage at that. I’d love to hear from you on that idea.

It’s a pleasure to take a call on Part 4 of this Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill. The issues that I want to raise in some questions to the Minister of Revenue are in respect of the changes that are being made to certain Crown companies and identities with respect to tax application. It may interest the House that the Clerk of the House’s and the House of Representatives’ status in terms of tax is being changed alongside a series of entities in clauses 222 and 224 of the bill. Now, the really important principle that we need to be cautious of in respect of these tax changes is that we ensure that we are not giving public entities some advantage in tax. Now, I’m pleased to advise you that the Clerk’s Office in the House of Representatives doesn’t face too much competition from other activities, and that doesn’t particularly concern me. What does concern me, both in terms of State-owned enterprises, Crown-owned companies, and the changes as they relate to local government companies, is that we’re not providing any tax advantage for a company that is owned by a Crown or local authority in taxation terms as compared with a private company.

Can I give some practical examples: we’ve got councils that are extensively involved in providing water services and in providing rubbish services. We’ve got Crown companies providing services like postal services and courier services, many of which are also provided by the private sector. So if you take my particular community in Nelson, I’ve got a council rubbish service that’s available to ratepayers in my area, but there are also private companies that offer those services. We’d all be familiar that, in the electricity sector, you’ve got Crown-owned companies that provide electricity services, but you’ve also got a large number of companies that are privately owned, and that applies to a huge amount of economic activity that occurs in the community.

So what I’m interested in is in terms of the changes proposed in clause 222 of this bill but also in terms of clause 224, “(Meaning of term taxable activity)”, to ensure that this Parliament is not giving some advantage to its own companies over those in the private sector. What I want to be assured of by the Minister in the chair, Stuart Nash, is that if you’re a council entity or you’re a Government entity and you’re providing a service out in the public, the changes that are being made to both provisions—the likes of goods and services taxes and other sorts of taxes—are such that you’re not screwing the scrum in favour of the public entities. What I think this Parliament wants to do is ensure that, sure, you can have a council trading entity—for example, take a big company in my own area, Nelmac, which is a local government trading entity that provides all sorts of contracting services—but that is not being treated any differently for tax purposes, income tax, or GST for that matter, as compared with a private sector company, or an electricity company, or any of those sorts of entities.

So, in clause 222, we were dealing with the question of interpretation. It’s proposed that there be a new schedule of qualifying public-purpose, Crown-controlled companies. The really crisp question that the Minister needs to address in this Part 4 of the bill is to reassure the Parliament and to be absolutely clear that we are not providing any direct or opaque tax advantage for those businesses that happen to be either owned by Government or owned by council activities. When I look at the changes that are being made around the meaning of the term “supply” and around the issue of what is a “taxable activity”, what we want to make sure as a Parliament is that there is that equivalence, whether it be a water service—and, actually, you’d be surprised, Minister, by the number of communities in New Zealand that have a private water company providing water services as well as those that are obviously council and, indeed, some of those that are owned by the State. The issue of tax neutrality as it applies to those trading entities is very important, and with the intention to establish a new schedule in the bill, we would like those questions addressed by the Minister.

The second part of my questions in this very extensive Part 4 are around the points that have been raised by my colleagues in respect of the changes around KiwiSaver. A number of my colleagues have raised concerns, particularly in respect of clauses 230 through to 237, which make changes to the way in which KiwiSaver operates. National is quite supportive of the amendments that enable, for instance, a person to be able to continue to be a member of KiwiSaver after the age of 65. It’s fascinating in an electorate like mine, actually, the number of people that are continuing in employment in that area, but there are issues around the contribution rates, issues around the non-deduction notices, and issues also in respect of the rules of those KiwiSaver schemes that my colleagues have raised questions about, of which we would like answers.

Then the last bit that I would really like to focus on is in respect of the changes in Part 4 around the changed tax status of child support. Now, we’ve got over 200,000 New Zealanders who are making contributions around child support. We as a party are very strongly of the view that if you are a parent of a child, then you need to meet your obligations and ensure you provide support for that child up to the age of 19. What I’m interested in is to get some reassurance from the Minister around the sections covered from clause 238 through to clause 242 as to whether this means that the parent that’s receiving the child support payment from the other parent is going to have their tax liability increased. This is quite a complicated area, because you have the income earner paying income tax before they make their child support contributions to their partner. The other partner may well consider the income they receive from their colleague as income for taxable purposes, but, actually, it would work out as a double tax if we then have the receiving parent also having to pay income tax on those.

What I’d like to hear from the Minister is some reassurance that through these changes to the Child Support Act, we’re not having the Government taking a greater share of money that is intended for the benefit of the children, particularly with respect to the changes to section 35 of the Child Support Act and the definition of what is a taxable income. The simple question for the Minister: is there going to be any reduction in the amount of net child support that is being received by parents that are receiving funding from a liable parent? We would be disappointed if the taxman was getting in the middle and stopping the money that was intended for the benefit of the child—money on which the earner has already paid income tax—to then have any additional liability as a consequence of the adjusted taxable income that is being amended in that clause.

Then, my very last set of questions for the Minister is just in respect of the student loan scheme. It’s an incredibly important scheme that affects over 300,000 New Zealanders. Getting the codes correct in respect of the changes to the student loan scheme is something that needs to be done with care. Again, I would like some reassurance from the Minister that those provisions in this bill, from clause 243 to 249 and the application of the PAYE rules as they affect those students that have got a student loan and that are now earning—that those workers are not going to be disadvantaged. In effect, I’m wanting to know: does this mean that those workers who are having their student loan contributions deducted from their weekly earnings—are we going to see as a consequence of those changes a reduction in those people’s net income?

Thank you, Mr Chair, for this opportunity. I must admit that I was a little bit slow in rising to my feet then, not because I didn’t want to take the call, but because I was hoping that the Minister of Revenue would get to his feet and answer some of the questions. He’s just been asked a significant number of important questions on a wide range of topics by my colleague the Hon Dr Nick Smith, but he’s also had a number of questions put to him earlier by other members on our side of the Chamber on important aspects of Part 4. I’d like to make a couple of general comments to give some context and then focus in on another aspect of Part 4 that hasn’t yet been dealt with in relation to ACC.

I think for those who are listening, it would be a fair observation to say that while there have been some very intelligent and thoughtful contributions, you can hardly call this a debate, because a debate, by its very nature, suggests a level of engagement. I wasn’t able to be in the Chamber for long before dinner, but I was following what I could via the TV when I was in my office and I’ve been in here since the dinner adjournment, and I have yet to hear a single Government contribution on any aspect of this important matter.

Well, this is important. Tax is the issue du jour for New Zealanders right now. They are deeply concerned in all of our electorates and are talking about tax levels and tax implications, as this Tax Working Group’s proposals are, frankly, causing huge consternation the length and breadth of the country.

So I say to the members opposite that it is time that you took a few calls—particularly on this aspect of this bill—and gave us some of your thinking. We are struggling to get any clarity, and while there is a lack of clarity on the future of our tax system—and, in particular, the tax imposition on Kiwi households—that has a very detrimental impact on business confidence and on investment confidence, and, long term, that leads to a real problem in job security and other things that matter for the livelihoods of New Zealanders. So I really implore members opposite to realise how important this is and to get to their feet.

If I could just make one other comment on that line, I was hugely proud, as a National member of Parliament, when the Leader of the Opposition earlier this year announced a commitment from the National Party that a future Government will end this long-held grievance that New Zealanders have with bracket creep and that we will index taxation thresholds to the rate of inflation.

CHAIRPERSON (Adrian Rurawhe): We actually dealt with that in Part 1.

Well, I realise that, sir. But, as I say, I’m trying to put some context around this debate because these are important matters. So, anyway, let me get on to Part 4, and—

💬 Darroch Ball: Back to the subject.

Well, I just say to the members who are interjecting that the approach of Government members at the moment reminds me of the innkeeper in Victor Hugo’s Les Misérables, who is constantly looking for new ways of trying to extract money out of hard-working Kiwi taxpayers and workers, and they, over that side, should be doing their level best to help them.

But let me get on to Part 4. One of the aspects is that it deals with—well, we’ve been hearing about KiwiSaver enhancements and child support measures, and the student loan scheme, which Dr Smith has just concentrated on, which is hugely important.

💬 Clayton Mitchell: I’m glad you spent 3½ minutes talking about everything else.

Well, it’s 3½ minutes so far, Mr Mitchell, that we have failed to hear from you, and I’m very happy to take a further call—very happy to take a further call—

💬 Hon Dr Nick Smith: You could yield.

I could yield. If Mr Mitchell would like me to, I’d be happy to yield. But I would like the Minister—because I know he’s been taking a few notes, and he is the Minister of Revenue, so we’ve got the right Minister in the chair right now—to discuss some matters of concern to Kiwi taxpayers, such as anomalies around the tax treatment of backdated payments from ACC for attendant care. Now, this is a huge issue out in the population. There are many wonderful people looking after long-term ACC clients who, in many cases, are absolutely dependent on care from other people. Therefore, it’s in everybody’s interests to ensure that the tax regime that surrounds the payment for those providing that attendant care is fair and appropriate.

Now, when we look at the bill, we see that there are some remedies to issues that have been identified, and let me just focus on them. There’s a new clause 123B, which would mean that reimbursement payments for attendant care are considered exempt income, including those covering an earlier income year. Possibly a little bit difficult for the average punter listening to understand, but maybe the Minister would like to explain exactly how that position has been—[Time expired]

Thank you very much, Mr Chair. First of all, Mr Tim Macindoe, Part 1, clause 123B—clause 123B is actually in Part 3 and it’s been dealt with, and the reason that we haven’t got members on this side of the Chamber standing up and debating this is because we agree with it. There’s nothing to talk about. Of course, the members aren’t going to talk about what might be going forward, because what might be going forward isn’t part of this bill, and the debate around the bill at committee stage has to be on the part in question.

So, to answer a couple more questions, Brett Hudson talked about—he asked why we couldn’t go down to 2 percent. So we’ve got “3%, 4%, 6%, 8%, or 10%”. Well, there are about 2.8 million Kiwis in KiwiSaver at the moment, so I think there’s a vast majority of Kiwis who have actually made a conscious decision to invest in KiwiSaver. Keep in mind the employer contribution sits at 3 percent, and we think that the minimum amount that an employee should contribute is the same as the employer contribution—hence 3 percent. So we’re going to leave it at that. I think including the 6 percent and the 10 percent—you know, that’s a good move that was supported by the Finance and Expenditure Committee, and that’s the reason we’ve done that.

Dr Smith, clauses 222 and 224—this isn’t about providing any form of competitive advantage in any way, shape, or form to any particular entity over another. The policy intent here is about public entities, so there’s no competitive advantage in that space.

Child support—I can give you an unequivocal answer that this will not mean any reduction in child support payments in any way, shape, or form. In fact, under the Labour Party’s Families Package last year, there were about 375,000 families who were, on average, about $75 a week better off.

💬 Hon Dr Nick Smith: Child support?

No, no—just generally. So we are not in the habit of taking money off those who are the most vulnerable. I would agree with you, Dr Smith, I think, when you said that often those receiving child support are the most vulnerable in our community. So, no, no—you can have my absolute assurance that this is not about taking money off those who would have received it anyway.

Then you also talked about student loans. All this is doing is it’s changing the definition of “special tax code” to “tailored tax code”. This is part of the Inland Revenue Department’s Business Transformation programme. What a tailored tax code is is that an individual, in fact, can call up and can outline the amount of income they’re getting—and this is certainly the case if you work in two or more jobs—and you will get a unique or a tailored tax code for your specific situation. So it’s bringing the tax system into the 21st century around business transformation. It won’t make any difference. In fact, it’ll go a long way to ensuring that those who have got a student loan, who are now working and have repayment obligations, are actually repaying the right amount. So it’s all good from that respect.

You had one other question. I can’t remember. Was that all the questions? I think that was all the questions.

💬 Darroch Ball: Well answered. Very thorough.

Very thorough. But I must admit it was disappointing when we had a former Minister stand up for five minutes and not talk about the bill at all. Maybe they’ve run out of things to say—maybe they’ve run out of things to say. But anyway, that’s my contribution.

Thank you for the call, Mr Chair. I take the opportunity to stand and speak to the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill in its committee stage this evening. I think my contribution is probably going to be shorter than the title.

We all know that this bill is an omnibus bill, and it does impact on several Acts. There’s no argument on this side of the Chamber that we do need to modernise our taxation system and deal with the taxation rates for the year. As many of my colleagues have mentioned this afternoon, we actually do believe that there has been a lost opportunity in this bill to leave money in the pockets of Kiwis rather than adopting the tax and spend policies that this Government is so set on. But we are not supporting this bill from the Government, which does tax hard-working Kiwis as though they’re a bottomless piggy bank and then goes on to fund untargeted and ill-thought-through policies.

But I’m going to turn my attention, also, to Part 4, which relates to the Child Support Act 1991, and in particular to clause 239, section 35(6), where the proposed bill talks about the role of the commissioner. Now, the section 35 amendment replaces (6) with “If a person’s taxable income for a tax year has not been assessed, the Commissioner must determine the person’s taxable income on the basis of the income and any other particulars known to the Commissioner.” So my question to the Minister in the chair tonight is: what are those other particulars likely to be, and how will they come to the commissioner’s attention if they are not recorded as income that is available to the commissioner? The reason that this is important is because those assessments that are made can have quite dire impacts on a liable parent who is liable for child support payments. I think I can safely assume that there would be very few MPs in this Parliament that have not had a constituent case where child support payments have had a crippling impact on a parent and they are seeking some relief. So, with this in mind, it would be helpful if the Minister in the chair could comment on whether he believes there is an adequate process for an appeal around these determinations that can be made by the commissioner, and that they are made under this clause 239.

My other point I’d like to make regarding this proposed replacement to section 35(6) relates to the commissioner making determinations on a person’s taxable income. Is this an activity that is likely to be delegated, and if it is to be delegated, what are those delegations likely to look like? I imagine that they will have to be, because it’s unlikely that the commissioner himself will be able to manage this without the delegations being in place. But it’s important that we’re clear about who will be making those determinations and undertaking that role on behalf of the commissioner, because the flow-on effects of that are life changing for a liable parent. Now, I’m not suggesting for one minute that we soften up on the approach to child support payments but, in the Government’s own words, we do need to be fair. If it’s not deemed to be fair by the liable parent, then there does need to be a suitable process that can be followed to reach resolution, especially when that outcome is determined by the commissioner, and that determination has been made.

I think it’s also appropriate that I use the opportunity to mention the huge investment in technology that’s been made—billions of dollars, in fact—that has gone into the Business Transformation programme that has allowed the treatment of tax to be easier for users and to allow people less time for compliance and costs, and certainly less time in settling their tax bills. We, certainly on this side of the Chamber, support the introduction of the automatic tax refunds. Thank you, Mr Chair.

Thank you, Mr Chair. One of the important parts of Part 4 deals with securitisations. I know members of the committee were very vexed about this issue because it is an important funding instrument for businesses and also for people to be able to invest in those types of businesses to enable them to fund their operations. I know some people are not aware of securitisations—what they entail—so it might be worthwhile just recapping that. I’m hoping I’m going to get someone to actually stand up on the other side and talk more about this because we, on this side, are just poised to hear from the Government on these matters.

A securitisation is where you take an asset—and it might come with an income stream—and you put that asset into a separate vehicle, and then, basically, you can sell off the rights to that income stream. The way that the Act is currently written, it allows those types of arrangements for financial institutions—so banks are a classic. They might have a motor car loan book, as an example, that has an income stream from the interest it earns from those people who’ve bought cars, and those types of instruments can be set up, and that’s, effectively, what securitisation is. But where the Act is quite deficient is it doesn’t allow for non-financial institutions. I’ll give you the reference if you’d like, Minister. So this is clause 213—there’s a whole lot of subclauses in there—and it actually covers some other clauses as well.

💬 Hon Stuart Nash: It’s Part 3.

Thank you, I’m very glad to help you—

💬 Hon Stuart Nash: That’s Part 3.

No, it’s not. It carries on through.

So the securitisation issue—how this is dealt with is important because, without the ability to do this and allow companies to fund those types of operations, it becomes an impediment, and because non-financial institutions are currently precluded from doing it, this Act allows this to take place. The big impediment to it is making sure that these securitisation vehicles remain tax neutral, and at the moment they’re not. So part of the changes were, basically, to allow the deductibility of it to stay within the group. And, in terms of the tax position, if, on the sale of the assets, which is normally set up into a special purpose vehicle that will be separated from the income flow that is sold and from the parent company so that if there’s a bankruptcy or any other things like that, then you couldn’t have recourse—it was a non-recourse type of funding.

That type of structure is what is envisaged, but the Act was very much around making sure that the tax consequences of that were actually tax neutral. I think the key thing about this is—the most relevant situation is—around trade receivables, which often want to be used by corporates who are using this mechanism out and about to actually fund their operations. I’m talking about large corporates that often may be listed on the stock market. Therefore, by doing this, it provides a mechanism whereby our companies can access additional financial markets and also support their operations.

I think, overall, the issue around this—and, I think, the prime thing—is to make sure that we’re not creating a tax advantage for these types of instruments, which are, obviously, very complicated instruments. But, at the same time, we are ensuring that there’s flexibility around those structures. There was a whole stack of submissions on the issue from a whole range of professional firms. They all agreed with the changes. We probably landed in a good place, but I think, from the general public’s perspective—and I’d like assurance from the Minister that where we’ve landed in terms of coming up with a tax-neutral situation is actually of paramount importance, and we’ve actually arrived at that position.

The other stuff I want to just talk about is the issue around land tainting rules of Housing New Zealand. This is very important because this is part of the Government’s drive with KiwiSaver, and without these rules KiwiSaver is under significant threat, if it’s not already. Of course, we know KiwiSaver is well behind its own target of building 1,000 homes this year. I think it’s 54 at the moment. But that—[Time expired]

Mr Chair, thank you. This is going to be a very brief call. I thank the Minister for answering the question I put to him a little while earlier about KiwiSaver contributions and why not a lower threshold at 2 percent.

The Minister, in his answer, said—and I have to paraphrase a little as, of course, the Hansard isn’t out yet. But the Minister, in his answer, said that at the moment there are around 2.9 million people in KiwiSaver and, therefore, that appeared to evidence that the 3 percent threshold was fine. Well, I believe the rough number the Minister used of 2.9 million people is the number of people enrolled in KiwiSaver. And we well know that the number of people enrolled in KiwiSaver is not equal to the number of people making regular contributions to KiwiSaver. If the number of people not making regular contributions to KiwiSaver were significant, that would in itself—I would contend—be a very good sign that, perhaps, the current lowest threshold at 3 percent is not low enough.

So my question to the Minister is quite simple: if there are around 2.9 million people in KiwiSaver, how many of them are not making regular contributions at this point in time? Thank you, Mr Chair.

I move, That the question be now put.