Taxation (Budget Measures) Bill (No 3)

I move, That the Taxation (Budget Measures) Bill (No 3) be now read a first time.

This Government is committed to building a tax system that is not only fair but works for businesses and taxpayers. It should be simpler for businesses and individuals to navigate. It should have lower compliance costs and strengthen the integrity of the tax system.

The first item in the bill introduces a ceiling on donation tax credit entitlements. The charitable sector does a lot for the community, especially in tough economic times. We continue to support the work they do and part of that lies in ensuring that the policy settings are targeted to achieve the most value for money for the Government’s contribution through the donation tax credit. The credit aims to encourage and reinforce charitable giving. However, the Government’s view is that the current open-ended tax credit does not provide value for money. Research shows that the increase in donations as a result of the tax credit is likely to be lower than the cost of the tax credit itself. The bill therefore introduces a maximum entitlement of donations eligible for a donation tax credit to the lower of $100,000 or the donor’s taxable income. The vast majority of donors will not be affected. To be clear, this proposal does not stop people from donating as much as they like. It merely places a cap on the amounts that are eligible to receive a tax credit. This is about giving the donating public confidence in the system and helping to assure the future of charitable giving.

The bill also supports New Zealand’s aviation sector by exempting aircraft leases from the non-resident contractor tax. In the industry and in the airline industry more specifically, operating leases have become more common owing to the global supply constraints and increasing global demand. It is a cost-effective way for New Zealand airline operators to acquire aircraft and aircraft parts, but a non-resident contractor tax is discouraging offshore aircraft suppliers from leasing to New Zealand. This is affecting the competitiveness of our companies. Affordable access to aircraft and parts is essential for economic growth and connectivity. If we lose access to aircraft passengers and freight, New Zealand and our economy will take a hit. That is why this bill makes a sensible change to exempt aircraft operating leases from the non-resident contractor tax. It’s about supporting more economic activity and encouraging more investment in our aviation sector, not discouraging it.

The bill also makes important changes to the rules around shareholder loans. We must always stay alert to the integrity risks in our tax system, especially when people are trying to avoid paying the tax that they should. Last year, Inland Revenue consulted on the growing number of issues of shareholders not repaying loans that they have taken from their own companies. While many loans are used appropriately, others can be used to strip assets from the company or generate other integrity concerns. That is why we are proposing that if a company is removed from the Companies Register, outstanding company loans will become taxable after six months. This strengthens existing rules that tax loans when they are forgiven by providing a clear and certain timing rule, will support tax compliance and improve Inland Revenue’s ability to collect tax. These changes will apply to companies removed from the register after 4 December.

The last set of changes amend and simplify the Working for Families scheme. We want to make it easier people to understand and to be clear on their correct entitlement. The rules for calculating the family scheme income currently are complex, making it difficult for many families to understand and apply correctly. Part of the application process requires people to calculate their family scheme income, which involves deciding whether a range of income adjustments apply to their circumstances. The proposed amendment streamlines these requirements by removing several income adjustments. It is about ensuring Kiwis who need support are getting what they are entitled to.

We are also proposing to simplify the residence requirements for Working for Families. All too often families moving overseas fall into debt because they have struggled to understand the residence requirements for entitlement to Working for Families. Currently, there are different requirements for the principal caregiver and for the dependent child, leading to inconsistent outcomes for families in similar circumstances.

We’ve proposed simplifying the residence requirements by requiring both the principal caregiver and dependent child to ordinarily reside and be physically present in New Zealand. This does not mean that people cannot travel; what it does mean is that families can travel overseas for up to six weeks at a time without affecting their Working for Families eligibility. Those travelling for longer and for specified situations, such as emergencies, will be able to seek an exception in order to continue to be eligible for those payments. This bill will strengthen our tax system. I, therefore, commend this bill to the House.

ASSISTANT SPEAKER (Maureen Pugh): The question is that the motion be agreed to.

This Budget and this tax bill are, in some ways, more notable for what they don’t do than for what they do actually do. We’ve already heard around the Budget—there were some interesting measures in it—that, in fact, those at the bottom of the heap are getting nothing from this Budget. In fact, they’re getting more pain. We know that’s coming through in subsequent bills. A whole lot of stuff has been announced, but there are also a whole lot of gaps in this Budget. Actually, it’s the same, in an odd way, with this tax bill.

Now, the Government announced a whole suite of tax measures today. It announced a whole set of changes around charities and not-for-profits, and that is sitting in today’s tax bill. It announced some work on non-resident contractors’ tax exemption for aircraft leasing, and that’s in this tax bill. It announced some work on company loans to shareholders, and that’s in this tax bill. It announced some changes to the Working for Families scheme income, and that is in this tax bill. Then there was a whole lot of material—a whole lot of things—that the Government announced that’s sitting in the Budget announcements around taxation, and that’s now sitting on the excellent website that the policy team at the Inland Revenue have put together. There were to be some changes to the foreign investment fund rules that has been announced, but they’re not in this tax bill. There were some changes to the financial arrangement rules to support migrants, but they’re not in this tax bill either. There was some work on modernising non-resident contractors’ tax—not in this tax bill. There’s some work that’s been announced on the research and development tax incentive—not in this tax bill. There has been something announced around changes to fringe benefit taxes around vehicles—not in this tax bill. And they’ve announced some changes to the thin capitalisation rules for foreign-owned banking groups—also not in this tax bill.

That’s interesting that this Government has announced a whole lot of tax measures, but it’s not announcing consultation on them or anything like that, and it’s not putting them in this tax bill. Why announce those measures on Budget day if it wasn’t going to put them in the Budget legislation? That is, I think, a real gap. In previous years, the Government has put substantial tax measures into the Budget tax bill; this year, well, there’s some stuff in there but not a lot. It suggests that this Government might be starting to run scared of us on committee stages.

Then I do want to talk about some of the issues that are in this bill. Now, at this stage, the four measures that are sitting in this tax bill—the four groups of measures—look fairly sensible. There are some issues around charity donations. I’d just note for the Minister’s benefit, since he didn’t seem to know it at that stage, that tax credits for charities have never been open-ended; they’ve always been limited by an individual donor’s tax-paid income. Nevertheless, there’s some interesting work there. There’s some good work, some sensible work, on the aircraft leases. It’s sensibly removing a barrier around aircraft leasing that’s been creating problems for our airlines. There’s some interesting work on shareholder loans. These have been a way for shareholders, perhaps, avoiding—well, I certainly don’t want to say evading but certainly deferring—taxation to the point that it is not paid at all. We can characterise that with various words. There are some changes to the family scheme income–so changes to the way that the family scheme income is calculated.

At this stage, this party, the Labour Party, will be supporting this bill through the first and second readings, but come the committee stage, there are some questions we do want to ask about all those measures and the impact on taxpayers and the impact on the Government’s fiscals, and some quite technical questions around some of the things which haven’t been done on them. For example, on the shareholder loans, I’m puzzled as to why addressing it has been done via the financial arrangement rules rather than via the dividend rules—that’s a choice but maybe not the best one. At this stage, we are supporting this bill, but we do know that this bill is a bill of gaps.

Tēnā koe, Madam Speaker. The Budget, obviously, doesn’t have a lot to console New Zealanders who are struggling with the higher cost of living and the fossil fuel crisis, and staring down rising unemployment over the next few years. We would have liked to see more than what has been announced. There’s certainly much more that we could be doing to help people through these difficult times.

This taxation bill has some interesting and very limited changes to the tax system. Overall, at first reading—and we only received this bill in the last hour or so, so we haven’t had much time to get across all of the detail—it appears that the changes are reasonable and marginally positive. They are a long way from like structurally making a fairer tax system, which we would like to see in the Green Party, but introducing a ceiling on donation tax credits seems very, very reasonable to us.

It was interesting just now—very quickly, trying to skim read the regulatory impact statements, which were only just tabled, so I only had the eight minutes of the previous speakers to look at them—but it did say that “The existing donation tax credit settings result in Crown expenditure of around $350 million per year.”—that is quite a lot—“The empirical evidence is mixed on whether such a tax credit is cost effective in encouraging charitable giving.” Personally, in my family, we participate in charitable giving, but we’d much rather see a lot of the core services that are excellently provided by charities being more directly funded by the Crown and not relying on the whims of those who happen to have enough money. We’re seeing charitable organisations that do really important work, helping people who are homeless—like the City Mission, the Downtown Community Ministry, and Kaibosh in Wellington; there are heaps and heaps of charitable organisations in Rongotai and Wellington that do amazing work. They are all struggling because people are struggling with higher cost of living, unemployment, and reduced investment. That’s precisely the time at which those charities need more Crown funding, and I don’t think we’re going to find that buried in the Budget, but I do think it’s fair enough that we shouldn’t be spending that core money. It would be great if this $350 million—which, maybe, the Crown is going to get back by putting a ceiling on the donation tax credits—was going to charitable organisations and funding them so that they can help the people who are really struggling as a result of the Government’s policies. I doubt that’s going to be a line in the Budget. Again, we only just saw the Budget recently, so we’re still digging through it to understand it.

While we don’t have issues with most of the what’s proposed in this bill—the company loans to shareholders changes make sense, and the Working for Families changes seem, actually, kind of sensible and compassionate, and the aircraft leasing changes make sense—there are some amendments to the Student Loan Scheme Act 2011. It’s unclear what changes are being made just from the summary of the bill, so we’ll have to speak more to that in further debates today. Of course, we would expect, because this is happening under urgency, that there will be plenty of time in the committee of the whole House stage for scrutiny because, of course, this bill is not going to select committee to get the normal scrutiny that it should get in our democratic system.

So that is the Green Party’s position: support at first reading. We expect to have a fulsome debate in the committee of the whole House stage and be able to dig into everything that’s happening. Finally, I’ll just say obviously what’s lacking in this taxation bill are the substantial changes that are needed to create a fairer tax system in New Zealand, which would mean more revenue for productive investment in things that actually make peoples’ lives better, that support them in meaningful work that helps build our country, protect our environment, protect our climate, and electrify it, because all of that is common sense.

This is very exciting—my first speech in the budget debate on the budget bills. I want to thank Minister Watts for bringing this bill to the House: the Taxation (Budget Measures) Bill (No 3), no less. Look, it’s going to be very exciting to work through this bill in all stages. Let’s get these changes in place. The Minister’s already outlined what they are. But alongside this, this really is fixing what matters on this side of the House in Government. There have been some other great announcements around simplifying the fringe benefit tax rules. That is going to help tradies and small businesses across New Zealand—very, very exciting. And for foreign investment funds rules—again, announced alongside this, time and time again we’ve heard about how this is actually holding people back. So the changes of lifting the threshold, which has been announced alongside from $50,000 to $100,000 is excellent. So I want to congratulate the Minister on all of the measures he’s put through in this Budget, and I commend this bill to the House.

ASSISTANT SPEAKER (Maureen Pugh): Can I just remind members, before the member starts, that this is the taxation bill. It’s not a general budget debate speech. Thank you.

Yes. And we’ll be talking about tax. Taxation (Budget Measures) Bill (No 3) 2026—thank you, Madam Speaker. The Government is looking to operate a predictable revenue system and the current main tax base is personal income tax, company tax, and broad-based taxes already are the main income earners for us. In a situation where we are attempting to return to surplus and rebuild the economy, we’d just like some of the people that are maybe still with us looking at Parliament TV to kind of be aware of what the alternative is here.

So far we have a policy-free zone from across the aisle. The only thing they’ve come up with is a capital gains tax, where they’re going to turn that into—what are they? Hospitals, private—what is it? [Interruption] Anyway, it’s completely incoherent. And then, across this side, we’ve got the approach to killing innovation and taxing success, otherwise known as the “Green envy taxes”. The Taxpayers’ Union, not usually our friends necessarily, but boy they’ve done a good piece of work here.

💬 Hon Dr Megan Woods: Point of order, Madam Speaker. Far be it for me to suggest to the Chair, but I think, when we have a Government member waving around documents from another party, we’re far from the bill being debated. You can sit down.

ASSISTANT SPEAKER (Maureen Pugh): Actually, that’s my call. And before the member stood up, I did remind the House that this is a taxation bill—it’s not a general budget debate opportunity. So please return to the bill.

Thank you, Madam Speaker. I wanted the public to be aware of what they’re up against here. So the alternative has been outlined.

Anyway, thank you. I join with my friend from the ACT Party in approving of getting rid of the fringe benefit tax for tradies. Fantastic little bill and we’ll have more to say on all the other parts of the taxation bill as we go through this process. Thank you, Madam Speaker. [Interruption]

ASSISTANT SPEAKER (Maureen Pugh): The—[Ryan Hamilton stands] Wow. That was close. I had my—

💬 Ryan Hamilton: Sorry, Madam Chair. So much noise. I commend this bill.

ASSISTANT SPEAKER (Maureen Pugh): I actually hadn’t called you, Mr Hamilton. I’m sorry, there was a lot of noise going on. So I call Ryan Hamilton.

Oh, thank you, Madam Chair. Look, this is a great bill. It’s some simple tax hygiene, some incentives for leasing of vehicles, leasing of planes—a huge opportunity. I commend it to the House.

Thank you, Madam Speaker. It is my pleasure to take a call—the first of many, I’m sure—on this Taxation (Budget Measures) Bill (No 3). Nothing screams budget legislation like kicking off with a piece of tax legislation.

Now, what we do know is the things that this bill is going to do. It’s quite a narrow piece of legislation and, as my colleague Hon Dr Deborah Russell indicated, at this stage, on the surface, these are things that Labour can get behind—the things that are done in this tax bill. But we will also have some questions as we go through these changes, as we go through the various stages of the bill, which is what you would expect.

So what we do know: the outstanding loans from company to a shareholder as taxable income of the shareholder six months after the lending company is removed from the register of the Companies Act 1993. That is not an uncommon situation where you do have companies having outstanding loans to shareholders. And making sure that we’ve got the legislative provisions right in terms of our tax legislation regarding that is something that we do need to cover off.

Charities—and this is introducing a donation limit of $100,000 per annum. As my colleague Deborah Russell pointed out, there has always been a cap, but this is about increasing it for natural purposes claiming a donation tax credit. So the change increases the tax received and the cap reduces the donation tax credits paid out. So one of the things that we really want to interrogate when we get to this part of the committee of the whole House stage is whether or not this might reduce the amount of money that is being donated to charities.

This is a very important question for us on this side of the House, because what we do know with a lot of other measures that are coming in through this Budget that are going to disproportionately make some of the most vulnerable people in our communities even more vulnerable, that never before in our history are our charities going to be called into action. We’ve had a release today that homelessness is at the highest point it has ever been in our history. And the role of charitable organisations when the Government is missing in action has never been more important. So this provision around any changes to the tax treatment of charities is something we will be interrogating with a great deal of scrutiny. Because, if we were to put any kind of handbrake on people donating to charities in the current context that we’re in, New Zealand would be in an even more precarious state. The people who are made even more vulnerable by today’s Budget would be put in an even more precarious state. So that’s something that we will be looking at.

There’s stuff around membership subscription and levies and there’s also about increasing the effective tax-free threshold for smaller non-profits. That’s increasing the effective tax-free threshold for not-for-profits from $1,000 to $10,000. Given that this threshold hasn’t shifted since 1979, there’s probably an argument that it probably is time to have a look at that threshold to see if it does need some movement. Again, this goes that we know for so many of our not-for-profits that are doing good work that this will make a significant difference not only in the amount of tax they pay, but actually in the compliance. So if that threshold is lifted, they won’t have the compliance that goes with needing to pay tax.

But as my colleague did indicate, there are a number of tax changes that were announced in the Budget today that are not included in this tax bill that we have that accompanies the Budget, and we’re interested to know why. So just signalling to the Minister that we are going to have some questions. For example, the changes to the research and development (R & D) tax initiative. Now, I can understand why in-year payments aren’t in this bill, because you can do them already. It’s just reannouncing something that has been the practice for a number of years in terms of making available to innovative companies their R & D tax credit so they can put that back to work in their business. So I can see why the Government isn’t at haste to change the law about that, given it’s already happening.

But I am interested that given that they want mining companies now to be able to claim any of their R & D tax incentives that that’s not in this Budget. So why is that not in this Budget and when is the Government planning to make the changes in order to do that? Because this is the only opportunity we get—[Time expired] Oh. I wanted to go longer. You could’ve given me longer!

ASSISTANT SPEAKER (Maureen Pugh): Actually, I was so engrossed I missed the clock myself.

This is a good bill. Let’s get it done. I commend it to the House.

Reo Māori. E te Māngai o te Whare, otirā koutou katoa kei ō koutou kāinga maha, tēnā rawa atu koutou katoa. E tū ana awau ki te kōrero mō te Pāti Reipa i runga i tēnei pire, arā te pire e pā ana ki ngā take tāke.

Māmā rawa atu te kite kāore rawa atu tēnei Kāwanatanga e paku mārama ki te ao tūturu e pā ana ki te iwi Māori, e paku mārama ki te ao tūturu e pā ana ki ngā tāngata puta noa i a Aotearoa.

[I will speak in the Māori language. Madam Speaker, and everyone in your various homes, I greet you all. I stand on behalf of the Labour Party to talk about this bill; that is, the bill relating to tax issues.

It is clear to see that this Government does not comprehend in the slightest the real-world issues relating to Māori, does not comprehend in the slightest the real-world issues relating to all people in New Zealand.]

It’s my pleasure to rise on behalf of the Labour Party to speak on the taxation bill. At a time where we know and we are told each and every day that the number one priority for people across Ikaroa-Rāwhiti and across Aotearoa is the cost of living, and yet, this Government have elected to make their first matter of business, post-Budget, a taxation bill that has very little relevance to what the people, my Electorate and Community Office (ECO) staff, and the staff of many MPs around Aotearoa are getting every day.

While my learned colleagues before me have advised that we are supporting this bill through to committee stage, it must be acknowledged that very few people in Ikaroa-Rāwhiti and very few people in Aotearoa are contemplating making donations over the threshold of $100,000. People across Aotearoa are contemplating the 30 extra dollars a week they need to find to keep roofs over their heads. They are contemplating why, at the moment, there are more cuts impacting their families.

Another thing: the Hon Dr Deborah Russell, in referencing the aircraft leases said that it’s sensibly removing some barriers. But once again, no one in my electorate has come to me and said, “I’m having issues about all these aircraft parts that I’m leasing. Can you do something to help me out?” Not one—shock, horror from that side—of my constituents has said, “Hey, Cush, all these aircraft I’m leasing, I need help.”, and yet, this is the first order of business for this Government. How out of touch.

💬 Hon Simon Watts: How did you get here?

Probably on an aircraft you lease—probably on an aircraft you lease. I’ve just been asked how I got here—ha! Yeah, you should catch it home. For the whānau watching, you can’t hear, but the interjections from the opposite side are longer than the speeches they make in their contributions. Again, an indication of the value they put on what matters to constituents around New Zealand.

💬 Cameron Luxton: Yeah, yeah—this is filibustering. Go on.

Sorry? You can wait your turn. You’re going to get time—and we’re going to get time to debate this further.

💬 Hon Kieran McAnulty: Wait for your 10 seconds.

Wait until you get your 10 seconds! So, yes, this is the first point of business.

Working for Families—again, that is actually something that comes up consistently throughout my ECO offices, throughout Ikaroa-Rāwhiti. Between Wainuiōmata and Rangitukia up the East Coast, Working for Families is something that comes up every day. Of course, simplifying that process will actually have a direct impact on families throughout Aotearoa who vote and put us all here. But I must reiterate, at a time when we’ve had cuts to Kāinga Ora; at a time when we have had cuts to Māori-specific education initiatives; at a time when we’ve had cuts to Te Puni Kōkiri; and cuts to services that directly impact Ikaroa-Rāwhiti and communities around Aotearoa, this Government is choosing for their first matter of business, post an underwhelming Budget, to discuss a taxation bill that will have very little real impact on the lives of the majority of Aotearoa.

So while we do support this bill through to committee stage, I must make those points.Tēnā koe.

In these days of unprecedented global uncertainty, this bill will join the rest of the bills that this Government will be delivering to fix the basics and build a future for all New Zealanders. I commend the bill to the House.

Motion agreed to.

Bill read a first time.

ASSISTANT SPEAKER (Maureen Pugh): This bill is set down for second reading immediately.

Second Reading