Social Security (Benefits Adjustment) and Income Tax (Minimum Family Tax Credit) Amendment Bill

We will now move to Part 2. This is the debate on clauses 9 and 10, amendments to Income Tax Act 2007. The question is that Part 2 stand part.

Obviously there’s more that I’d like to traverse over Part 1, but I will move to Part 2. I want to specifically ask questions around the minimum family tax credit.

As the supplementary analysis report for this bill states—which we keep referring to because there’s no proper impact statement—approximately 3,200 low-income families are receiving minimum family tax credit, which is an incentive to ensure low-income working families remain better off financially in full-time work than they would be on a main benefit. The minimum family tax credit thresholds are linked to main benefits. If the lower thresholds of the tax credit are not increased in line with main benefit rates, low-income working families are likely to be better off on a benefit than in full-time work. Inland Revenue is apparently addressing this and changes were progressed through the mini-Budget, alongside this proposal.

Could the Minister explain the implications of this bill on the minimum family tax credit and the general summary of that particular area or concern that’s been raised in paragraph 40 of the supplementary analysis paper. I’m quite keen to know if there are any impacts on those receiving the minimum family tax credit; what are they? The intent was always that it would provide an incentive for people to be in work. Does it still do that with the changes that are proposed, including, of course the ones that are proposed in Part 2? I’ve got a number of other questions but let’s just cut to the chase and answer that one.

Thank you very much, Madam Chair. I’m interested to know, just leading on from what was already identified in terms of the impacts on the minimum family tax credit, my question for the Minister is specifically in relation to those people who are social housing tenants. It’s specified that there’s currently 43,700 social housing tenants receiving a main benefit who will be specifically impacted by this part of the bill. I want to know from the Minister what type of analysis has been done that she can give us. It’s very briefly covered in not the regulatory impact statement but the supplementary analysis report. Given the fact that the housing crisis particularly impacts people who are on main benefits, I want to understand what level of analysis has there been specifically for those 43,700 New Zealanders who are in social housing and who are also receiving a main benefit. What are the impacts on those people in terms of this change?

Kia ora. Just a couple of questions we want to put out and consider, and our apologies as we have new MPs; not everyone’s as zealous at rushing up.

One of the things that we want to ask the Minister is why hasn’t the family tax credit been adjusted? Indeed, if it is the intent of this Government to go back to resorting to the actuary approach—the future liability model approach that we’ve seen National use, I think, maybe in the Paula Rebstock days—it would be really great to understand at what stage the interventions are being done, and if you are tracking and monitoring some of the adjustments that are not being made, how indeed you are looking to, I guess, track those interventions at the varying stages of the transitioning of those who are on benefits. I guess, within that, there’s two or three questions that we’d like to seek clarity on.

Just following on the comments from Debbie Ngarewa-Packer, I’m just interested, particularly, in the abatement rates.

I note that they’re staying the same and that hasn’t been adjusted for almost two decades. So what does she think that having an outdated abatement rate does for employment opportunities and prospects and income security for people entering employment; just that kind of income shift? Because at the moment, it’s $42,700.27 and we think that if it’s adjusted to inflation, that would go all the way to $66,000. So I guess I wanted to unpack why there wasn’t an opportunity being taken to evaluate how we do the abatement rates for this kind of support, which is in the second part of the bill.

That is ultimately salient to what the Minister was talking about earlier, and the previous debates, including the first and second reading speeches. Because of that focus around employment and other types of support, as people’s incomes change, the abatement rate is outdated. That actually can create a perverse outcome where people may not be as better off financially in employment as they would have been otherwise. So I’m just interested in any considerations that would have been taken in relationship to inflation-adjusted abatement rates.

Thank you, Madam Chair. I’m going to keep my answers very clear within the scope of Part 2, which is the Income Tax Act 2007 changes.

The first member asked about the changes to the minimum family tax credit threshold, and that increase will be from $34,216 to $35,204 after tax. So that is the increase in the threshold that would be effective with the passage of this legislation. That is what is used in the formula to work out what the minimum family tax credit would be that the person is entitled to.

For those that don’t understand or have detail about what this minimum family tax credit does, it guarantees a minimum income or minimum level for sole parents who are working at least 20 hours a week and a couple or parents who are working at least 30 hours between them. So the current approach hasn’t changed. Really, all this is doing in Part 2 is changing the threshold so that sole parents are better off working and receiving the tax credit than they would be receiving a benefit on an annual basis. So the only change in this legislation is the threshold.

Members, the Government has indicated it wishes to end urgency, so the time has come for me to report progress.

Progress to be reported.

House resumed.

Madam Speaker, the committee has considered the Social Security (Benefits Adjustment) and Income Tax (Minimum Family Tax Credit) Amendment Bill and reports progress. I move, That the report be adopted.

Motion agreed to.

Report adopted.

As has been mentioned, the Government has indicated to me that it does not wish to continue in urgency. Therefore, this debate is interrupted and set down for resumption next sitting day. The House stands adjourned until 2 p.m. today.

The House adjourned at 12.58 p.m. (Wednesday)