Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill

Members, the House is resumed. We now move to the third reading of the Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill.

on behalf of the Minister of Revenue: I move, That the Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill be now read a third time.

This bill was introduced in June 2020 in the immediate aftermath of the national COVID-19 level 4 lockdown, and the economic landscape has shifted significantly over that time. The Government has had to respond at pace. Since the introduction of this bill, there have been numerous response measures to the pandemic and measures to support businesses and workers. This resulted in the Supplementary Order Paper to this bill released in June of last year, among other changes to increase the automatic tax write-off threshold from $50 to $200 for the 2020 tax year to help ease the financial stress caused by COVID-19.

A second Supplementary Order Paper was released, and this too contained response measures by the Government to address significant issues. Along with further economic recovery measures to promote growth and measures to protect the integrity of the tax system, the Government has already announced the most significant new measure added to the bill: the further extension of the brightline test. This is a response to a housing situation which has been with us for some time, but which has, since the advent of COVID-19, gathered significant steam. The housing issue is now a serious problem, both for would-be homeowners and for the economy. The International Monetary Fund (IMF) has recently pointed out that our ballooning housing market could trigger a pronounced correction. The IMF went on to say that mitigating near-term housing demand, particularly from investors, would help moderate price pressures.

We must take steps to protect our rebounding economy from future shocks. A housing market correction would threaten our recovery. We are not introducing a capital gains tax; we are expanding the brightline test. The brightline test, as members are aware, makes residential property, other than the family home or inherited property, taxable when the property is sold. The current period of the brightline test is five years, which was extended from the original two years.

But research suggests that this is still not enough. The median ownership period of property in New Zealand is typically around seven to eight years. That means that the gains on the sale of most residential investment property are escaping taxation, and the tax advantage gives property investors an incentive to invest in housing over other types of assets. This is unfair as it means that, unlike other forms of investment income, it escapes taxation and distorts investment away from more productive investments. Extending the brightline test to 10 years will help to ensure that people investing in property pay tax on their gains on investment. The extension to 10 years will generally apply to property acquired on or after 27 March 2021.

Residential property purchased before the application date will continue to be subject to the five-year brightline period. This move will help property investors out of the market into more productive areas of the economy, make the tax system fairer, and, at the same time, will make homes more affordable. However, that is not the sum total of the Government’s response. Tax is neither the cause nor the solution to New Zealand’s longstanding housing problem. But it can help. This proposal is therefore part of a suite of measures to achieve the Government’s housing affordability objectives.

I turn now to the other measures added to this particular bill. The first of these is to support business by introducing a new business continuity test for the carry-forward of tax losses, as long as there is no major change in the business activities of the company, taking into account the asset used by the company to generate income. Kiwi businesses are hungry for capital as they strive to get ahead. But one problem they face, especially start-ups, is that they cannot access previous losses if they fall foul of our current loss continuity rules. Our current rules were designed as integrity measures to prevent avoidance through lost trading, but we think they are unnecessarily strict and are hobbling growth. So we are proposing to loosen those rules while still upholding the integrity of our tax system.

Another new item addresses an issue where the tax rules have become an obstacle to businesses wishing to donate goods for charitable purposes. This became apparent as businesses which began to respond to COVID-19 by donating trading stock found that they were liable for the tax on the disposal of that stock. This is a disincentive for charitable giving—for example, a hand sanitiser business is liable for tax if it donates some of its products to a hospital, or a clothing retailer is liable for tax if it donates clothes to a city mission, or a farmer is liable for tax if they donate animals to a food bank. This is obviously not the outcome we want in this COVID environment, so we are proposing an immediate but temporary solution which will apply to donations of trading stock made on or after 17 March 2020 and before 17 March 2022.

Finally, a significant measure will allow Mycoplasma bovis - affected farmers to reconsider previous income equalisation deposits if they retrospectively elect to use the new income spread rules and certain conditions are met. There are also a number of remedial and technical amendments to improve the administration of unclaimed money, support the introduction of a new 39 percent tax rate, and disclosure requirements for certain trusts.

In conclusion, the measures that I have discussed are truly important for Aotearoa New Zealand. In different ways they will contribute to a fairer tax system and support our economic recovery. They join the other measures in this bill, which will have similar aims. I and this side of the House are proud of this bill, and it gives me great pleasure to commend this bill to the House.

Thank you, Madam Speaker. I can’t say it’s a pleasure to be talking on the Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill. This bill—we spent a lot of time in the Finance and Expenditure Committee dealing with it, and what we thought we were going to be discussing yesterday on this tax bill transpired to be something totally, totally different, with the lodgment yesterday at 2 o’clock of a 60-page Supplementary Order Paper which means a new piece of legislation that is inserted into this bill.

So I think this bill—the title of it is totally erroneous, because the principal clause around this bill is little to do with what we’ve talked about, although some of the measures are OK. But more, I think it should be “Taxation (Annual Rates, Feasibility, and Remedial Matters) Bill and How to Thrash Mum and Dad Investors Who Own a Rental Property and Do a Good Job in Trying to Provide Accommodation to Hard-working New Zealanders”, or, in other words, let’s slap a capital gains tax on people that as at 9 a.m. yesterday morning—although the media had access to the data at 8—found out that the rules have totally changed and have driven a change in their property rights.

Many New Zealanders own rental properties, and in the main, most—the vast majority—only own one rental property. These changes, as a result of this being thrust through like a steamroller last night under urgency, have meant that people have woken up this morning—if they’ve been listening to their radio and they haven’t been away on holiday or they’re not on a camping trip—and will find out, over time, when it seeps out through to the public, that their interest in their property has been fundamentally changed, not only because of the increase in the brightline period from five to 10 years but, probably more dramatically from a financial perspective, they will lose the deductibility on the interest on their house.

Now, that is quite a significant issue for mum and dad investors who do own rentals, and I think that this is going to lead to an increase in rental payments. Mr Robertson received a lot of advice from entities not inconsequential, such as Treasury and IRD. At the most, you could probably characterise the advice as fairly neutral on the impact on rentals, but the strong inference and, in some cases, advice is that these changes will lead to an increase in rental prices. I think if the Government is trying to do that and that occurs, we are in a really bad position, because we’ve imposed all these additional requirements on landlords, including all the other requirements that have been passed over the last couple of years around quality of builds, but if we lead to a situation where our most vulnerable people and the people who are not in a position to be able to buy a new house and are therefore renting, and if we get to the situation where we have an increase in the rents that they have to pay, that will be a terrible social outcome. And I’m concerned that these measures will actually result in that outcome.

We do not want people seeing their rents increase. We’ve already seen rents increase by $120 since this Labour Government has come to power. We’ve seen a rapid escalation in house prices.

The thing is, there is a correlation between house prices and rental costs, of course, but whether this has a chilling effect on people wanting to build new homes I think is a big issue. Last night, I was told by someone actually here in Parliament, a senior partner in an accounting firm, that as a result of Mr Robertson’s announcement at 9 o’clock, a proposal worth hundreds of millions—and I’m not exaggerating—to do a rent-to-buy scheme effectively went on hold yesterday afternoon.

💬 Hon Grant Robertson: Were they building the properties?

They were in the process and they were trying to get the money, and as a result of a lack of—in terms of the lack of clarity, they have pulled it.

💬 Hon Grant Robertson: They’re exempt from it. They’re exempt, Andrew—you know that.

And one of the reasons why they pulled it, Mr Robertson, is when they went to the IRD, because they’re in a situation—you’re talking about professional advisers here; you’re not talking about people just waltzing around the street. You’re talking about—and it’s hundreds of millions of dollars’ worth of property. They could not get adequate clarification from the IRD about these changes, and so, as of yesterday, they pulled the proposition.

Now, I had other texts last night from people who are in the situation where they’re buying a house. We know, because we covered this last night, that you will have to make an election in the next—well, it’s actually three working days; we’re now down to 22 hours of working time—as to whether, in fact, you want to proceed with a property purchase or not. In some cases, you have to make an election. Now, if you happen to be away, out of phone coverage, whatever, then you will not be in a position to make that election. You will probably have to sign a form. So we’ve got a number of people who will be disadvantaged by this.

This goes back to the whole central issue about ramming this piece of legislation through, trying to get it off the agenda, trying to get it out of the media because they know it’s bad—the media reaction today has been dreadful. [Interruption] It has been dreadful. If you think it’s good, well, fantastic; you must have been listening to something different. Trying to ram it through—what should have happened is that New Zealanders should have had a good opportunity to talk about these changes.

I think, my personal view, is—one of the reasons Mr Parker said that they are trying to ram it through for urgency was they were scared people were going to rush in and buy a whole lot of properties. I think that just shows a lack of commercial nous. If you think about it now, as a result of the changes of what was introduced yesterday, you will be looking at the opportunity of whether, in fact, you want to invest your money into a rental property, knowing that you’ll now have to hold it for 10 years, otherwise you’ll have to be taxed on the capital gains, as opposed to five at the moment. Or the fact is that you will not be able to deduct the interest on that loan that you may use to acquire that property. So the likelihood that people want to pile into the market as a result of yesterday’s announcement I think is just ridiculous.

The more likelihood is many New Zealanders, mum and dad investors, will be waking up this morning going, “Gee, I think I’m going to have to sell that property.” Of course, they either sell that property or, because of their higher interest costs, they’re probably going to start to think about how they’re going to increase their rents. Again, we get back to that double-edged sword. If you’re trying to remove and reduce the price of rents, which we’re all very concerned about, and moderate or stabilise the house inflation, this package doesn’t get there. It does not provide that framework. And I think—this is what IRD and Treasury have said in their advice—there is a potential it will lead to higher rental price. So if that’s what we’re going to achieve, if that’s what the Government wants to be known for, that’s fantastic, but I think we’ve got a real issue with that.

Then, of course, we haven’t—there are other parts of the package yesterday that were announced that we haven’t been able to canvass yet around the infrastructure spend, who’s going to manage it, and whatever.

But I think, essentially, what has happened yesterday is the Government has imposed a capital gains tax. I just want to clarify this point. The Government’s great—it’s the only time I’ve ever seen them want to nick an idea from National. But we did clarify the rules around the brightline test when we brought it in a number of years ago, which was to say that if you have the intent to sell a property within two years, you will have to pay a tax on it. There was a lot of uncertainty around that aspect. What we did, by passing the two-year brightline rule, is give to the IRD clarity around the rule, which said if you sell within two years, you have the intent to buy and sell that property, and that’s why you should pay tax on it. That is a different mechanism from when you move that from a two-year test, a clear intention test, to a 10-year hold period. If you now have to hold your House, your rental property, for 10 years, that is clearly a capital gains tax, because you are not in the business of buying and selling houses. If you are trading houses, then you will always have to pay tax on it. But by moving the goalposts from two to 10 years, as this Government has done, this, effectively, means for tax purposes that that is a capital gains tax. I’m sure the Minister of Finance will know the difference between income tax and capital gains tax. So I think this is a really sad day—

Order! The member’s time is over.

Thank you very much, Madam Speaker. Before I respond to some of the comments from Mr Bayly and talk about the bill, I want to acknowledge the hard work of officials in putting together taxation legislation. It’s complex, it’s large, it often covers many topics—hence the name of the bill that you see in front of you here—and it’s a very difficult piece of work. So I want to acknowledge all of the officials who have contributed to the legislation that is in front of us, and, indeed, contribute to the taxation legislation generally as we go through the many bills in that space that Parliament covers each term.

We often hear from the Opposition about the importance of addressing the housing crisis and the need for action and the need to provide solutions. And then a Government steps forward with a package that will make a significant difference in housing affordability, and the Opposition says, “Oh no, not that—something else.” Well, the something else that we keep hearing about are things like changing our planning laws. Yes, we need to do that, and we are doing that, and we have a plan to replace the Resource Management Act, we’ve got the National Policy Statement on Urban Development moving through, and we will make those changes.

But none of that would address the fact that we’ve got a lack of infrastructure that we need, and so therefore the Government steps forward with a package on that. But saying that it’s all just supply ignores the fact that the housing market is always a balance of supply and demand measures. So, yes, we must build more houses, and we are; yes, we must make sure that the infrastructure is in place; yes, we must support first-home buyers more to be able to get into that housing market; and, yes, we need more apprentices, and we’re putting more apprentices in place for our construction industry as well. But if we completely ignore the demand side of the equation, then we’re only doing half our job here, and so I think the changes that were put forward in this bill are important ones to be able to manage that demand side of the equation.

I think I want to clear up a couple of Mr Bayly’s misconceptions in that speech he just gave. The extension to the brightline test covered in this piece of legislation here is prospective. So all of those people he’s talked about who made decisions, those decisions stand. We’re talking about an extension about when one buys the property going forward, and I refer Mr Bayly to the excellent wiring diagram that the Inland Revenue put out yesterday as part of this announcement to show what happens to people who are currently in that situation. What this bill does is look forwards, and what it also does—and critically, in this initiative—is that that extension to the brightline test does not apply if you’re building new property. And this is the trick, because we have to address supply and demand together. And what we’ve been hearing—and we’ve all been getting different feedback about this over the last 24 hours—is particularly from property developers, saying, “This is an opportunity. This is a chance to build, and to shift that investment from the speculative part of property investment to property development, to building that extra supply that New Zealanders need.” That’s what we’re hearing from property developers around the country—is that they see that this is the opportunity, with the interest deductibility changes, which also do not apply if you are going to do new builds.

And so here is a package that actually seeks to do two things at once. It seeks to give first-home buyers a better shot, but it also seeks to address some of the supply issues that we’re facing. And so Mr Bayly, in his comments, didn’t really reflect that.

The other element of this bill which has got a little bit of attention this morning from people—I would have thought the Opposition would have given this a bit more attention when they were debating the bill—is the fact that we have clarified the change of use rules when it comes to your home. Now, the interesting thing for me here is that there seems to be some form of amnesia on the other side of the House, because, firstly, the brightline test was brought in by National, and when they did that, they actually did have a formula which said that your main home is your main home, but it set up a cliff-face that that was 50 percent—50 percent. The change made last night means your main home will never be part of the brightline test when it is your main home, but after a 12-month buffer period, we will actually measure when it’s your main home and when it’s not. That’s actually fairer on everybody, and builds on what National already did. So this is, quite clearly, something where they don’t want to remember what they did, and, actually, the provision is fairer.

The bill also clarifies the issue of short-stay accommodation, which was a gap both in the initial creation of the brightline test and then the extension. This is not when you live in your home and you might rent it out once or twice; it’s when you don’t and it’s short-stay accommodation—that is now captured inside the brightline test as well. They are important integrity measures to make the brightline test work in the way that it was intended.

It is vital for New Zealand that we get on with building more houses and create build-ready land. It is vital for New Zealand that we ensure that the mix of supply measures we have can also support first-home buyers with affordability. On this side of the House, we know that the level of house price rises we’ve seen in recent months is completely unsustainable. It is unsustainable from an affordability point of view, but it’s also unsustainable from a broader economic stability point of view, unless we’re prepared to act, and that is what we have done. Time and time again in New Zealand, Governments have been asked by people to act in this space. We have gone after a tax loophole and we’ve closed it. We’ve used the lever that already exists through the brightline test here and extended that. This package is a big part of making a difference in the lives of New Zealanders and of first-home buyers, and I’m very pleased to support the bill.

Well, that was a very interesting and very defensive speech by the Minister of Finance on what should be a simple bill, made complicated by the fact that its 77 pages have been added to by a 50-page Supplementary Order Paper, which has in it very substantial changes to the way in which tax is applied to investment properties.

Firstly, let me say that issues in this bill like the unclaimed money provisions, the company transfer provisions where there’s a sale but no particular change or unreasonable change of activity, the Mycoplasma bovis provisions for farmers having to get rid of stock, and the clarified depreciation arrangements on non-residential buildings are all good things, and there are many other small things in here that are of great value, but let’s be clear: this bill refers to, effectively, by its title, a very significant change to tax law—that is, the brightline test, the taxation that comes from sale of an investment property, residential property, inside a 10-year period—as being simply a remedial matter. It’s not.

This is a bill that, with its provision, will see rental costs in New Zealand rise. It’s interesting that even the IRD, who have the greatest knowledge of where the income comes from these sorts of properties, recommended against this course of action. I asked the Minister of Finance today in a select committee how much money has been collected by the Government in brightline tax since its introduction. He didn’t know. He said, “IRD will know.” So I can only assume, since the number is not being put out there by a Government that, apparently, is the most transparent that we’ve had in New Zealand’s history, the number being kept quiet, it’s not very big. And I think that would be why the IRD has said this is not a good thing. It’s why the IRD recognised, too, that it’s likely to increase rental prices.

So let’s take a typical case: mum and dad investors buy a second home. They take out a $500,000 mortgage to buy that second home, and they put some tenants in there at the rental rate that’s going for the day—recognising, of course, that that rental rate, on average, has increased by $120 a week since the Labour Government came into office in 2017; a huge amount. Wages certainly have not gone up by that amount. But leave that aside. Mum and dad put some tenants in their property, and they are paying their $500,000 mortgage. Over the lifetime of that mortgage, they’ll pay $156,000, roughly, in interest at today’s rates of around 2.5 percent to 2.6 percent. At the moment, they can deduct all that off the income that comes off that and they can set it against their own income from other sources. So it’s always going to be a third of the amount.

Now, as it just happens that, on that $500,000 mortgage, the increase caused by the non-deductibility, the increase in the cost per week caused by the non-deductibility, happens to be $120 a week. So, if you were to turn round and say, “OK, what is the deductibility rate on that?”, it’s about $40 a week. So, from the time this bill comes into effect, every investor who has a tenant with a mortgage of $500,000 will be $40 a week worse off. How long will it be before that is recovered? The next time there is a rent review, up they’ll go. And it won’t be unreasonable. If they run off to the tribunal and they lay out their expenses, they show what the deal is, the only conclusion will be that that rental rise is reasonable. So it is naive in the extreme for the Government to think that this is going to put any pressure on flattening of rents.

Then there’s this issue of “Oh, well, it’ll give first-home buyers a bigger chance because a whole lot of those investors are going to run away from the market.” They might—they might—because, actually, at the moment it’s not a bad sort of deal. They’ll be on the five-year brightline; so they’ll sell their house. In the last three years, it’s had, on average, a $250,000 increase in its value. That’s the sort of escalation that we’ve seen, and if they were to pay the brightline, after all their expenses, they’ll still walk away with about $190,000. So, yep, a few might decide to sell—a few might decide to sell—but let’s be very clear: there will be a huge problem created by that, because a lot of rental properties, where there might be three or four people living in them, sharing that accommodation, will suddenly crash down to perhaps two people. And there are agencies out there at the moment who say that is exactly the problem with the rental shortage at the present time.

So here we have a Government trying to fix a problem by actually bringing in laws that will reduce the rental pool and at the same time put rents up for those who are caught in that rent pool. It makes absolutely no sense whatsoever. It’s rushed, it’s fast, and when officials are questioned on it, their answer is “We don’t know.” So they’ve sort of been directed—I appreciate they’ve got to do what the Government of the day wants—but they have not had the chance for a broader consideration to be given to this particular problem. And, behind it all, the finance Minister sits there today and says, “Well, we’re building more houses. This will push more houses being built. The developers are ringing us up and saying this is a great thing that’s going to change the whole market.” I doubt that actually. I’d like one of them to step forward with some decent figures to show us that, actually, this will make a difference to not just their bottom line, because it certainly will, but to the problem of getting first-home buyers into their first home.

Those people looking to buy that first home who have been saving for the last three years are already $50,000 behind in their savings programmes because of that $250,000 increase in average price. Work it out: they’ve got to have a 10 percent or 20 percent, in many cases, deposit for a second-hand house—20 percent. Well, what’s 20 percent of $250,000? It’s $50,000. And they will have had to save that just to be treading water on where they were when they started. So it’s that impossibility for young people, for first-home buyers, that the Government is not addressing, and the idea that you can somehow fix the problem through a tax base is complete rubbish. It is denying the fact that the brightline test captures people who trade in property only. And that’s always been the case. Even if they do pay the tax, they still win, because that’s how markets work when there is a scarcity of supply. I can’t understand why the Government hasn’t looked at some of the examples that they could have, of situations where there was scarcity of supply and there was suddenly a whole lot of land made available for people to build on. It’s happened, yet we have no bill on that. We have this obscure sort of “We’re going to work on the Resource Management Act and perhaps make it more possible.” Well, that will be a very long time coming, and in the meantime there will be no change.

So, a couple of predictions: I predict that rents will rise as a consequence of the actions the House is likely to approve today. I think, also, the idea that, because the brightline test is going to stay the same for a new house and the deductibility will stay there for a new house, there will be a massive transfer of people into buying those houses doesn’t make any difference to the renter—doesn’t make any difference to the person who wants to buy a house. So we’re told today at the select committee that, in the Budget, there’s going to be some more moves to try and help first-home buyers. The best thing that can be done is to recognise that, on a new build, the Government takes a very substantial amount of the price that’s paid for that new build in tax—just work out the GST content alone; it’s massive. And that is applied all the way through. Local government have rules for the construction of subdivisions that make it very, very capital intensive because you can’t start selling until it’s all fully consented and ready to go. Changing some of those things will make a difference. This bill will make no difference. It will have very little effect on supply and a huge effect on the rents paid by first-home buyers.

I find it telling that in the first two speeches offered by the Opposition on this bill in this third reading, both speakers have focused on the name of the bill. They’ve focused on the name of the bill and decided that that was an issue worth debating instead of looking at the extraordinary substance of this bill. And there are a number of extraordinarily good, taxpayer-friendly measures in this bill, measures that taxpayers have asked for for a long time and that have now been delivered by this Labour Government. Measures like the feasibility expenditure provisions, which get rid of a black hole where businesses could not deduct some expenditure—we have fixed that. Measures like the donated trading stock rules where a person who was generously donating trading stock, maybe food, to people in need ended up in some cases with a tax bill because of it, so we’ve fixed that. Measures like the business continuity rules, where under the old rules there was a very strict numerical test as to whether or not a business could carry forward tax losses, and now we’ve moved to a substance of business test and that has improved something—something that taxpayers have been asking for. These are substantial taxpayer-friendly measures in this bill, and the Opposition has ignored them.

The Opposition has instead chosen to promulgate ideas which, frankly, are wrong about the brightline test. They’ve asserted that it would have a huge effect on developers, who would choose not to continue their developments. But—and this is really important—the extension of the brightline test to 10 years does not apply to new builds. It’s really important to understand that. If people are ringing up concerned that their new build, their new project, might get caught up in this: it will not. The extension to 10 years does not apply to new builds—straightforward and simple. And the changes to the brightline test are prospective. If someone bought a house two months ago, that falls under the old rules. If someone bought a house one week ago, that falls under the old rules. If someone buys a house today, it falls under the old rules. Because there is a window of opportunity for people to make their business decisions now—right now. It is a prospective measure. It’s going forward, so there is good protection in there for people who are choosing to enter the residential property market.

We have heard objections from the Opposition asserting that we are putting a tax on the family home. We are not. The brightline test does not apply to the main family home. When the main family home is being used as the main family home, the brightline rules do not apply. That is a straightforward thought. So we have protected the main family home, we have protected people who have already made their decisions, we have protected new builds in this extension of the brightline test, and it is very important to have that in mind.

So focusing on the substance of this bill, it protects people who have made their business decisions already, it puts in place measures which we anticipate will help to control the rampant speculation in the property market and to make things easier for first-home buyers, and it puts in place a series of substantial taxpayer-friendly measures in a realm of areas which taxpayers have been asking for. This is a good bill, and I commend it to the House.

E te Māngai, tēnā koe; tēnā koutou e te Whare. I’ve been engaged in this dialogue about this law, which has become far more interesting, actually, subsequent to the Supplementary Order Paper placed on the Table yesterday as a result of the Government’s announcement, than the speeches that we heard at, for example, the first reading when the technical amendments were far smaller to the Income Tax Act. But in those conversations with people on social media, there are a number of folks who are raising the fact that they played by the rules—they played by the rules, and they got ahead by playing by those rules, so they should be able to lock in those gains forever. Then there are those who have also played by the rules but haven’t necessarily managed to get into, particularly, the property market, where not just—you know, two-thirds of wealth in this country held in property, which is, effectively, as noted by a number of different commentators across this country, and notable economists. Property in this country has for a very long time been, effectively, Government guaranteed, not obviously explicitly but effectively.

One of the many reasons for that is because of the fact that two-thirds of wealth is held in property, is because loan-to-value ratios have been so low for so long. It is because those mortgages that are held by investors actually present a huge financial system liability should they fall over. This is why the Greens have been engaged in this dialogue around the need for a really soft landing, because this bubble, as estimated by a number of prominent economists across the world, is very likely to burst unless we meaningfully rise to the challenge in front of us, which is this rampant housing crisis.

Alongside that, the facts and the reality of it, I’ve engaged with a few people in talking about the history of a game which is probably quite renowned or well known to many of us—that’s the game of Monopoly. The game of Monopoly was invented in the early 1900s by an American woman called Elizabeth Magie. She herself identified as a Georgist, for those who are interested in political theory. But the actual original name of Monopoly was The Landlord’s Game, and it was invented as a gamified version of how unfairly a system or economy operates when you continually emphasise the accumulation of private land at the expense of the many. The whole point was to try and educate the players of this game about the importance of directing investment towards productive outcomes. Yet for some reason or another, as The Landlord’s Game by Elizabeth Magie was bought by and, I believe, eventually produced by Hasbro and has turned into Monopoly, the game that kids know and love, it seems to have become the rule book that many a politician wants to reinforce.

But society is not a board game. When the rules are not working for the majority of people, as evidenced by those statistics that I brought to the fore last night that have been incredibly well reported, that the top 10 percent of New Zealanders own 59 percent of the wealth and the bottom half own just 2 percent, and the majority of that wealth is in housing, and when you have wealth inequality, particularly of that scale, that wealth inequality continues to compound and get worse, as we have seen. Society, life, governance, and politics is not a board game. When the rules are not working, we have an opportunity to change them.

There’s been a lot of discussion in this debate so far, particularly from the Opposition, who railed in favour of, you know, the points put forward by the property investors’ lobby, saying that this is just going to increase rents and that this is just how the market works. Well, dare I say it, they’re engaging in a little bit of economic tomfoolery, because the reality is, as we see constantly, market rents are always the highest that the market will possibly allow at that intersection of supply and demand. We know that supply has been so low for so long as a result of successive Governments and their neglect and inaction that there is simply not enough homes that landlords or those who are holding that property are willing to put on to the market at rates that are affordable to those renters. In turn, there is an immense amount of land banking and speculation that goes on, where development should be under way. I can point to a number of car-parks which are just flat tarmac in my electorate, which demonstrate the immense policy and political failure over the past several decades, because that should be a space where density is done well.

I also need to point to the other kind of rhetoric that is often thrown out there when we’re talking about property investors. So often that’s mum and dad investors, and I have heard other politicians in these debates referring to their own parents and how these investments in properties were their retirement plans. Just for the sake of offering a contrast of opinion in this Chamber, because this Chamber isn’t particularly well represented in the form of renters, if we’re talking about mum and dad investors, we also need to talk about mum and dad renters, like my mum and my dad, because there’s a number of those around the country as well. If we’re talking about those mum and dad investors and we’re trying to capitulate that these are the people who are going to be so massively impacted by this, then they must be those who sit at the very top of the pecking order, which makes them a very specific niche of mums and dads, that top 10 percent of our society who own 59 percent of all of the wealth. Dare I say it, the rules have been tilted in their favour for far too long.

So this is one small part—one, I might add, Treasury gave the Government the advice that this should be extended beyond the 10 years, which is currently in the bill; should be to at least 20 or 30 years. The Greens favour it for indefinitely, because the very purpose of the brightline test, by the way, is to just make sure that the test of intent actually applies properly under the Income Tax Act—that is, it initially was intended that if you are selling something with the intention of making an income in the form of capital gains, then you should be paying tax. We’ve just, kind of, ignored that. The reality is that the brightline test simply enables another layer for the IRD to enforce that with far better efficacy.

So the Greens support this bill. It doesn’t go far enough, in our opinion, and I’m sure we’ll have a flurry of other debates about this. I mean, I’m sure that the Labour-led Government and the Labour Party in particular feel as though they’ve hit just right when they’ve got the right wing railing against them and they’ve got the left railing against them on the other side. But there is so much more that we can do if we want to meet the scale of this crisis, particularly the latent crisis of inequality in this country, which, if I may add in my final few moments, flows through to every other challenge that we face, whether it is climate action, or inaction, and the way that that will disproportionately impact our lower socio-economic communities; whether we’re talking about schools and the fact that transience is increasing at an enormous rate, and how that is impacted by the lack of security that parents and that whānau have in certain rental properties and the need to move constantly, yanking their tamariki out of primary school and placing them into another halfway through the term.

Equality should, I hope, in future be the foundation of the kinds of things that we’re talking about wanting to achieve in this Parliament, because I think that we can really get carried away with that kind of economic tomfoolery that I alluded to just before. We have an opportunity and, dare I say it, an obligation in this House to rule for all New Zealanders, and that doesn’t just mean protecting those who currently have done pretty well out of the way that the rules work. Again, I want to just clarify that this is in no way, shape, or form intended to be construed as an attack on those people. It’s simply to say that society functions best when we ensure that everybody has the basics. The Greens support this bill. Thank you.

New Zealand, we have a problem—we have a tax problem. This was a pretty boring bill, actually. I remember taking it to caucus and sitting down with everyone and trying to explain it. That was before yesterday, of course. Just to go back to the previous iteration of the bill, one of the great aspects of it was that we were finally trying to at least attempt to align KiwiSaver moneys in relation to what is happening with moneys in Australia. That’s a $2 billion problem, which, I think, in this whirlwind of a captain’s call on a capital gains tax yesterday, has been lost. But I’d just like to reinforce that is vital work inside this tax bill.

After yesterday, and the stealth tax—call it what you want—I just wanted to point out that on a per capita to GDP basis, we’ve gone back 5 percent. So this is going to affect our wellbeing. And so everybody knows, we have the highest tax to GDP ratio and the highest tax to GDP per capita ratio in the Asia-Pacific region.

💬 Dr Duncan Webb: What about the State and provincial tax?

Income tax. So I just want to make a point that in the original iteration of the bill, we were trying to address some simple, fixable aspects, and we were trying to set the rates for the tax base for this year—that was the purpose of that bill. Things have moved on and we now have a situation where—and, I guess, the Government did flag this by capping rents that can be put up on an annual basis, and they have to be thinking now that this premeditated strike yesterday to change the bill was signalled by the finance Minister and it has led to a brightline test where ACT has always been opposed to this test and always seen it as a problem which would grow from an acorn to a giant tree one day and be unstoppable. But I heard, this morning, interestingly, that new modelling has been done on core tax revenue and its implications for the brightline test, and it’s been a captain’s call, effectively. And, you know, what it has led to is another reinforcement that Mr Robertson has joined Mr Cullen as being somebody who’s really happy to go back on their word, and brought into consideration what is, I think, the most punitive tax regime we’ve seen.

So, effectively, against that background, we, obviously, oppose this bill, but we’d like the Labour Party to understand that where there is good policy, the ACT Party will support tax reform—and we do call for a fundamental review of the tax system in the future. Clearly, all our competitors are making themselves more competitive at a corporate tax and income tax level, and the people of New Zealand deserve to get that as well. We are also finding there are distortions that are going to arise from the increase of the higher tax bracket, which means that people will take out and cap $280,000 moneys out of their business, and they’ll find other ways to get it out. But, more importantly, people are setting up in other jurisdictions and exploiting our skilled labour to actually take them under contract and we don’t get any tax capture from either the company or the individual.

I brought a couple of concepts up yesterday because 10 years is a long time—and, obviously, Mr Parker hasn’t budged. But people’s lives can change in a nanosecond. There are two things that happen now. One is stranded assets; people are going to either have to hold on, they can’t make any choices if they go through a divorce, there is no flexibility in this area in terms of providing New Zealand people with a loosening of the choke around their neck, and we still haven’t heard anything back from that. With these tax incentives, or negative incentives, these properties could be going to better hands and younger people, and it is something we felt should be addressed overnight, but it hasn’t been.

One of the things that people seem to forget is that blaming mum and dads and calling them “investors” or “house flippers” is just wrong. It is the lack of supply that has driven up house prices. The Government needs to focus not on using tax as a lever here but actually getting on and building some houses, because they can get money so cheaply—1 percent—yet it is happy to pay four grand a week for a four-bedroom house to rent. So, you know, that is the main priority, and using the tax system to leverage that: it is not going to land it, we’re not going to tax our way out of this. The announcement yesterday reinforces to me that we’ve created an artificial shortage of land in this country—which has a load of land—and until we solve that problem, we are not going to move forward and, you know, investors will now just hold on to their properties.

The big issue here is not just the brightline test; the real issue is the deductibility of expenses. That is going to drive up rental prices—that is just a given. I think the Labour Party have to accept that that is now their responsibility, and they have to accept that this is an unintended consequence—they accept that—for trying to deleverage a system that is using tax as a driver, but that is just one part of the package.

ACT has been saying, for some time, that we need to have some longer-term thinking about infrastructure and partnerships and proposals at a local government level. We also need to be thinking longer term about our tax base. We think that taking money and extracting money from the people of New Zealand, whether it is a nurse or a doctor or a teacher, it just can’t go on for ever. You know, we need to look at foreign direct investment as an alternative source of income for the country. We need to be efficient with our tax system, where—the Minister points to that he won’t look at that. And we need, actually, to think through what happens when Treasury says it doesn’t know what the outcomes of these results will be.

So just going back to GDP growth, and one of the big problems that we see in this area is that we’ve got to be more productive. We’ve got to increase taxes through capturing new companies coming to New Zealand with higher skilled, higher wage jobs, and lift the boats for everyone. There seems to be a sort of bipartisan warfare going on that doesn’t really address the fundamentals of an honest conversation around how we actually improve people’s lives and real wellbeing, as we would call it in the ACT Party.

So we don’t believe that yesterday’s announcement is a magic solution to anything. The rather boring tax bill that we had, there were some good elements to that, which we supported. But on the issue of a higher corporate tax rate and also what happened yesterday, we can’t support this bill. We actually would like to reform a lot of the tax system over the next couple of years with the Minister.

Just to conclude, when you don’t know what the impact of core tax revenue is going to be from extending the tax, it doesn’t really meet the public scrutiny test. We’ve had no opportunity to put this through the Finance and Expenditure Committee. We’ve had no opportunity to consult with the outside world. And, you know, from the Labour Government knocking back the tax decrease in 2017, the petrol tax, the 39 percent tax, the brightline tax, we now understand that everything is going to get passed under urgency. The one consoling factor I had this morning when I asked the Minister was that he said there were going to be no more new taxes in the foreseeable future—but we‘ve heard that before. So ACT cannot support this bill.

Tēnā koe e te Mana Whakawā. I agree with the previous speaker, Damien Smith, on one point, and that is that we need to direct investment to the productive economy, and that is what this reform, this brightline reform is aimed at—because we don’t create jobs, products, services, innovation, and ideas by directing investment to investment properties.

We know that, for many years, there has been a tilting of the tax system in favour of residential investment properties, and so this extension of the National Party’s brightline rule simply adjusts exactly that. It says there is plenty of capital about, but don’t put it into residential property, and if you earn—over the course of eight or nine years on an investment property—$100,000, $200,000, $300,000, then you should be taxed on that, because that is income, that is an increase in wealth which you should properly share, you should properly be taxed on.

So, look, the other thing I want to point out: New Zealand does not have—by international standards—a high tax rate. It is quite erroneous to stand up, as the last member did, and suggest that one single sliver of our tax system—income tax—is reflective of the overall tax burden. If we’re going to talk about overall tax burdens, let’s talk about—in other countries—the State and provincial tax, the sales taxes, and the plethora of other taxes. The elegance and simplicity of our tax system is one of its great strengths, and the brightline test is another thread in that, saying here it is, there is an irrebuttable presumption that if you sell an investment property within a given period of time it is taxable because the intention is clear, it’s a statutory presumption of intention that you intended to make money by that increase in value. And I want to point out, that this reform was one that was prompted by the International Monetary Fund pointing out the risk of instability in our financial system because of a rampant housing market driven by investment.

So this is a prudent reform, it’s one to strike balance, it’s one to direct investment in the right place, and it’s entirely appropriate at this time because this Government is one which will take action on the housing market.

The next call is a split call.

Thank you, Madam Speaker. Look, I’ll start off with what we agree on, and I think everybody in this House would agree that house prices in New Zealand have been going up too far, and, ultimately, New Zealanders are being forced to spend too much of their wealth and their income on housing. When we talk about our standard of living, we’re all about trying to improve the standard of living of New Zealanders. Well, that’s been weighed down by the enormous amount of money that people are having to put into housing, whether it’s to buy a house or to rent a house. So we’re all in favour of making progress on the affordability of housing.

But then the agreement seems to dissipate, because when I look at the situation, I look and see what the two real drivers of the housing problems that we’re facing are. One is the shortage of supply. There’s not enough housing, and that’s putting up the price either to buy or to rent. So increasing the supply of houses is a critical focus, and it amazes me that four years into this Government—more than—we still haven’t got anywhere on the Resource Management Act reform. There’s lots of talk, lots of announcements, lots of fiddling around. We’re still miles off making any progress on that in order to make it easier for New Zealanders to build houses and to get going. So there’s been lots of hot air, lots of talk, and lots of announcements. We’ve had Phil Twyford walking up and down the country. Phil Twyford was going to fix the housing crisis. Jacinda Ardern was going to fix the housing crisis, when she came in. It was the biggest focus of everything they did. And four years on, they’ve made no progress, really, on increasing supply, apart from a handful of houses. They stopped more houses being built at Ihumātao than the whole of the KiwiBuild saga has generated.

The other thing pushing prices up, of course, is the incredibly low interest rates and massive quantitative easing programme going on in New Zealand and all around the world. It’s not just house prices that are going up; it’s art prices, it’s any single asset that you can look at. The prices are going through the roof because money is being poured into the system; it has to go somewhere. So they are the two things that are really driving up house prices.

But this Government comes along and it turns to tax because it always wanted to. I stood in this House many times last year looking across to Grant Robertson and saying, “People of New Zealand, you cannot trust Labour on tax.” Grant Robertson says, “No, no, no, we’re not making any changes to the tax system beyond putting up the top income tax rate for wealthy New Zealanders, and, secondly, maybe some petrol taxes. But beyond that, we’re not doing anything.” And I would say, “You can’t trust Labour on taxes.” Then all the journalists would say, “Why do you keep asking about this? Grant Robertson has made it clear they’re not doing any more taxes.” So that whole thing was shut down during the election campaign. “We’re not going to put up taxes. We’re not going to have any extra taxes. We’re not going to extend the brightline test. We’re not going to put up taxes.” So what happens? I’m afraid he was telling fibs. He had no intention—

💬 DEPUTY SPEAKER: Order! The member’s been here for a considerable length of time to know not to use that to term. He will withdraw and apologise.

Withdraw and apologise. The Minister of Finance wasn’t telling the truth. He stood up in the House many times and said that—

💬 DEPUTY SPEAKER: Using the name or the descriptor are equally incorrect and out of order. Final warning, Mr Goldsmith. Get to the bill or I will terminate your speech. He will withdraw and apologise for the second infringement.

I withdraw and apologise. But the Minister of Finance stood up in this House and said, “I am not going to increase taxes.”, and after the election he increases taxes. So you can say whether or not he’s being economical with the truth or not being clear and consistent. The line that he used is—what is the funny line that he was using? “I was too definitive on the topic.” Well, it may well turn out, when you get to the Budget next month, that he was too definitive on saying that he wouldn’t come up with death duties or gift duties or any other—land taxes—increases to the income taxes, because he might have been too definitive during the election campaign.

The thing about that is in New Zealand, in this country, over the last few decades, after the horrors of the Muldoon and fourth Labour Government year, when Governments came in and broke a lot of promises, we have had a tradition in this country where New Zealanders—

💬 DEPUTY SPEAKER: This is not a general debate. He should come back this afternoon if he wants a general debate. I’ve listened—in the last couple of minutes, you haven’t even spoken to the bill. He should do that immediately. Final warning.

Well, thank you, Mr Speaker. I’m grateful for your guidance on that issue. But at the very heart of this bill, that has been changed at the last moment for a Supplementary Order Paper to bring in changes to the tax system in direct contradiction of what this Government said during the campaign—I think it is highly relevant to what we’re talking about in this bill. So they’ve broken their promises, and, secondly, having rushed this through under urgency, I make a prophecy right here, right now, that we will all be back in this House fixing this legislation in the next few months, because they will have mucked it up—

The member’s time has expired.

Thank you, Mr Speaker. I’m absolutely astonished that that member—the Hon Paul Goldsmith—of all members wants to dedicate a five-minute speech to the last election campaign. What the last election campaign taught us is that New Zealanders are sick of whingeing. They want to hear solutions.

For many, many years, we’ve been talking about a housing crisis in this country and in every single contribution from that side of the House as we do the third reading of this bill—a bill that provides solutions—we’ve heard whingeing. Where are their solutions? What I think New Zealanders wish to hear on this debate of this bill—if they disagree, what would they do differently? All we have heard is criticisms without solutions. In fact, in credit to the ACT Party, Damien Smith–whom I am becoming quite fond of, I might say; a bit of a character and actually talks about the issues. We’ve got a situation now when we are putting forward solutions to the housing crisis. The National Party are offering no solutions and the ACT Party are offering a solution of borrowing because of good interest rates to build houses. Well, that just says the situation that we’re in.

This bill offers a way forward. It expands the solution that the National Party brought in when they were in Government—an idea that they were trumpeting at the time but now they are critical of—and it is a prime example of opposition for opposition’s sake: when it’s their idea it’s good and when it’s our idea it’s bad. The New Zealand public will see through this. They know how serious this housing crisis is and they can see, through this bill, that this Government is actually doing something about it. It incentivises new builds—exactly what we need to do. It disincentivises investment in existing properties and speculation in existing properties outside first-home buyers—it’s exactly what we need to do.

What we need is this Parliament to look at solutions and not politics. It’s a lesson that this party learnt years ago. It’s a lesson that other parties in this House have learnt. It is not a lesson that the National Party have learnt. For some reason they feel that the way forward for their party is to sit and whinge and bicker and moan. Where did it get them last time? This bill is about solutions to one of the biggest issues facing this country and I commend this bill to the House.

Sometimes, you don’t know where you’re going until you know where you’ve come from. Some of the history of this proposed legislation that’s in the bill is increasingly important, and having practised tax for over a decade, I’m going to take us through why we’ve got to this point, in the bill.

The history of this provision in the Income Tax Act to capture property speculators is lengthy. It goes back to the Land and Income Assessment Act of 1891, a time of high demand and scarcity of freehold land availability. It sounds familiar, right?

💬 Hon Members: Yep.

Absolutely. So the Government, then, had to act, and that’s why this side of the House is acting as well, because we’re in the same setting as we were in 1891. The underlying policy of the land rules in the Income Tax Act is that where land is treated like a trading asset—and this is important, Mr Bayly—a revenue account property, not capital, then you tax the profits you make from it. The most significant recent changes to this provision was the brightline test in 2015 brought in by the National Government to remove the ambiguity of the intention test.

Now, I left the House last night after the debate feeling a bit of déjà vu. A lot of the contributions that came from the other side of the House were the contributions I heard when I worked on this bill as an official back in 2015 under the National Government, and I make note that I looked back at the committee of the whole House in the Hansard. Last night, a number of the contributions that they made—we had the Minister back then sitting in the chair; he took zero calls during that committee stage to clarify the policy intent of the brightline test when it was introduced in 2015. So I thank Minister Parker, who sat in the seat last night and took 40 calls—we counted it; 40 calls—to help clarify those positions around the main home exclusion, business premises, etc.

I also thank IRD officials. I know there’s probably been late nights. We had a late night last night, so I thank you for your thoroughness in all your workings on this particular bill.

So I go back to the beginning of my contribution—that you don’t know where you’re going until you know where you’ve come from. I’ve come to this House having been brought up in a home where at one point we had 24 people living under one roof. I come to the House to act and to provide solutions. So that’s why I’m proud of this Government for acting, and I commend this bill to the House.

This bill breaks an election promise. It imposes a new capital gains tax, it puts a new capital gains tax on family homes, and it increases these taxes, it breaks these promises, without any clear evidence about who will benefit. In the last election campaign, members opposite—the Rt Hon Jacinda Ardern, the Hon Grant Robertson—were definitive. They said, Labour will not introduce a capital gains tax. In fact, the Hon Grant Robertson went one step further. He was very definitive and made an absolute commitment that Labour would not adjust the brightline capital gains tax.

Now, despite the revisionist history we have heard in this House today, that is exactly what is happening. Under urgency, this Government is ramming through a breach of its commitment to New Zealand voters, and those opposite should hang their heads in shame. We have had an argument that this is simply an extension to something that was already there.

Let us be very clear: when National introduced a brightline test at a two-year limit, it was specifically for the purpose of stopping speculation and property flipping. But what we see in the law that is being passed in this House tonight is something that will target a broad sweep of New Zealanders. It will impose a capital gains tax on people who are choosing to own a residential property, to rent it out, to be good landlords, to save for their retirement. They have no intention of becoming property speculators, of becoming flippers, of becoming developers. No, they are just good landlords providing a rental property. They will now be captured by a capital gains tax and that is Labour’s doing, and to say that this is somehow a policy that National introduced is farcical and it’s desperate.

So we have to ask ourselves: why is Labour taking this step? Why are they breaking an election promise? Now, what we’ve heard from members opposite is that this is to make housing more affordable and it’s to give first-home buyers a better start. OK. So let’s see: is that actually what this new capital gains tax will achieve? Because, actually, there’s very inconclusive advice on what impact the tax will have on the two main components of housing affordability.

The first is house prices. Well, actually, we haven’t had a single definitive statement from the Minister of Finance, or any member opposite, about what impact this new tax will have on house prices. So the jury’s out on that one.

The second component of housing affordability is rents. And I’ll tell you what, if you’re a first-home buyer, this matters a lot, because rent determines how much money you have left at the end of each week to save for your deposit. So when rents go up—as they have under Labour; $120 a week since Labour came to office—that affects housing affordability.

So we turn to what the officials say about what the impact of this capital gains tax will be on these two core issues: house prices and rents. Now, the first thing that is shocking about this is that the regulatory impact assessment of this bill, which gives us a window into what officials think about it, is that Treasury say they didn’t have time to form a view on what this new provision will do. That is shocking. Here we have a major breach of an election promise on an issue that will affect tens of thousands, if not hundreds of thousands, of New Zealanders, and our main Treasury advisers haven’t even been given time to form a view. But what they do say is that “tax settings are not the primary driver of problems in the housing market,”.

Now, we know that. New Zealanders know that. New Zealanders know that actually what needs to happen here is that a housing shortage needs to be addressed with new houses being built. But Labour stuffed that up. KiwiBuild, which was their idea of how to get houses built—the grand promises; you remember, Michael Wood. You remember promising 100,000 homes. Well, you mucked that up, didn’t you? You actually only managed to build just under 800.

ASSISTANT SPEAKER (Hon Jacqui Dean): Order! The member will not bring the Speaker into the debate.

My apologies, Madam Speaker. So Labour know that they’re not really very good at getting houses built. So instead they’ve turned to tax. And the officials say that this tax policy—to quote Treasury—“may put upward pressure on rents.” They then go on to say that it’s very difficult to see how this policy will interact with the other components of Labour’s housing package and what impact that will have on house price affordability. So what we have is a broken promise, grand objectives in terms of what this new tax will achieve, and, yet, no evidence that it will have an impact on the two major indicators of housing affordability. You’d think you’d have better grounds for breaking a promise.

The other area that is very significant, and that we have chosen to highlight, is that this breaks a promise that has been longstanding on the family home. Just yesterday, Grant Robertson said in no uncertain terms that the brightline test does not, and will not, affect the family home. Yet, at the very same time as he was making that promise to New Zealanders, he was also introducing a specific change in this bill to ensure that thousands more people’s family homes will, in fact, be captured by the brightline capital gains tax. I want to step you through the change he’s made because I think that it is an absolute case of a finance Minister sneaking something in, hoping people won’t notice. Well, we’ve noticed and New Zealanders need to know about it.

The rules used to be that you were only captured by the brightline test if you rented out your home for more than 50 percent of the time to which that test applied. So if the rules had stayed the way they were and the Minister hadn’t snuck through his change, what that would have meant is that New Zealanders who bought a house, from next week, and held that house would only be subject to the brightline test if more than half the time they owned it they rented it out. So in the case of someone who owned a house for nine years, if they rented it out for 4½ years, they would have faced a tax obligation, under the 10-year test.

But what Grant Robertson has done is he’s said, “No, no. I’m going to be far more punitive. Anyone who rents out their house for more than 12 months will now be captured by my brightline test.” Now, members opposite have been dismissive about this, but let’s think about the thousands of families, the new homebuyers who are going to be buying houses in the next few months, and the impact it will have on them. They will be brought into the capital gains tax regime.

Let’s talk about who these people are. It’s people who relocate for a temporary period for work, maybe because they have to work on an emergency management scenario or help out at a managed isolation and quarantine facility, and in order to make ends meet while they’re doing that, they rent out their family home. Well, too bad. Bad luck. Under this Government, they will face a capital gains tax.

Let’s talk about the family in tragic circumstances, whose child needs medical treatment at Starship Children’s Hospital, the family need to relocate for a period, they need to stop work—

💬 Hon Poto Williams: 12 months?

—and they have to rent their house out for 13 months to make ends meet. Well, what the Hon Poto Williams wants to see happen is that family face a capital gains tax. Well, we say on this side of the House that that’s wrong. The Government shouldn’t try and sneak through that sort of a change.

This bill is a breach of an election promise. It imposes a new capital gains tax, it puts a new capital gains tax on family homes, and there is no clear evidence about whether it will actually fire a bullet at the goals this Government has. What we do know is that when the five-year brightline test was introduced by Labour in 2018, here’s what the impact on house prices was: house prices between when that five-year test was introduced and today went up $230,000.

So the evidence about what the impact of this will be is scant. What this bill shows overall is that when Labour is in doubt, when they’re facing a difficult and complex problem, their instinct is tax it. Their instinct is, when in doubt, don’t trust New Zealanders with their own money; take some for yourselves. When faced with a problem, when faced with a housing shortage, when faced with the inability to build houses, put a new tax on it, cross your fingers, hope it works. Don’t worry about assembling evidence. Don’t worry about the commitments you’ve made to people in the election campaign. Break your promise. Who cares about the risks? Take the money. Tax it. Hope and pray. Well, we’ll see. The jury is out.

I rise in support of this bill and I am absolutely thrilled to be here, giving this particular speech. What actually appears to be the case is that the Opposition just completely lacks a vision, and this bill does exactly the opposite. There’s a very, very strong vision here. There’s a strong vision about what Government does and what it should do, and in this situation what we see is a bill that consistently encourages investment in the right places in our economy.

We have a bill here that now encourages investors in the housing market into new builds, and that is exactly where they should be. They should not have been speculating on homes that were already there. We need an increase in housing stock, so now we have carrot and we have stick. The carrot here is that if investors go into new builds, the brightline test does not apply to them at 10 years. If they go into new builds, they will actually be producing something of value, and it is recognised here.

It’s a very different situation for people on lower and middle incomes in New Zealand who want to own their own homes. They get a boost by this. They get a right to bid for those houses without those kinds of investors who already have capital and who outbid them every time. They get that right to get that dream fulfilled and that’s a very important thing, and it’s an important thing to child poverty and it’s a very, very big focus of this bill that we are focusing on those lower and middle income earners.

It isn’t something that’s happened by accident. Other parts of this bill also encourage investment. We can see that in the business continuity test, for example, where there is a reshaping so that we are actually encouraging innovation and investment. When people have spent a lot of capital in a business and they’ve grown it and they’ve taken a risk, they get to move into a new place in the maturity of that business by adding a capital investor, and they don’t have to meet the 49 percent ownership any more. We can look at the similar business that they’re involved in, and that, again, does exactly the same thing: it encourages investment.

There’s the issue about feasibility. The feasibility deduction is something where, again, people are encouraged to go out there, take a risk, try something, and, in fact, if it doesn’t work, they can abandon their project and they can recover. It’s a really important part of the bill.

But I also want to talk for a minute just about the other part of this bill, which I think has been really scathingly attacked by the Opposition, and that is the increase of income tax. This is a very fair tax bill, and I come from that bracket that was talked about in terms of income. I’ve come from a high income, but I’ve also worked as an employment lawyer, and I have watched people walk into my office every day who work as hard as they possibly can and they never come near those tax brackets. They’re doing meaningful work, they’re helping people, and when I hear members—self-congratulatory members—talk about how they have worked hard and say that that is why they are on these incomes, I can tell you that it’s way more an accident than that. It’s an accident of class; it’s an accident of education. It’s a good thing to earn lots of money, and I don’t wish them any harm, but it is very, very important that the focus of this Government is in the right place. It is on working people and it is making sure that everyone gets a fair go, and I for one have no problem with paying a higher income tax that is actually fairly minimal in these circumstances.

Everybody shares in this economy. I have children who do not earn that kind of money, and I want to support them. I want to support my community. That’s what income tax is about, and this Government has its eye on the ball.

Thank you. I commend this bill to the House.

I declare the House in committee for further consideration of the Regulatory Systems (Transport) Amendment Bill.