Taxation (Budget Measures) Bill (No 3)

Committee of the whole House

Thank you, Madam Chair. I want to start with the commencement date, and I want to specifically just focus on two parts of the commencement date. I think my colleague the Hon Dr Deborah Russell may have more details on some of these. The first one is around clause 2(1), “This Act comes into force on 1 April 2027.” Just checking—very reasonable, 1 April 2027; start of a financial year. I get it. But then, why does it need to be under Budget urgency? There is more than sufficient time for us to go through this process more fully. Again, even—as we see with some of the other bills—a truncated select committee stage would suffice.

I’m more curious about clause 2(2)(b). This is the part that we debated around dry leasing and aircraft in New Zealand, and I note that this is retrospective in terms of the commencement date. I do want to check why, in that case, is it retrospective? We were kind of hoping to save that question for the commencement part. I’m going to start with those two short questions.

Committee of the whole House

I have just a couple of calls to take on this part, and one of them—I’ll do this call now, because I was going to talk about the title, but I’ll do the commencement date call right now, and then I will be seeking another call. Again, it’s around the commencement date of 1 April 2027. Now, my particular concern here, again, is around the Budget urgency and the Budget urgency for the changes to the donations tax credit. That donations tax credit will apply from 1 April 2027. It just strikes me as odd, then, that this particular piece of legislation needed to go through under Budget urgency. Now, if it’s not going to apply until 1 April 2027, then this legislation could have gone through as part of the tax year beginning 1 April 2026 annual rates bill. There was no particular reason that it needed to go through as Budget urgency.

This is really important with respect to the donations tax credit, because overnight we’ve been hearing from people working in that sector—in particular, my colleague Helen White has been hearing from them—and Philanthropy New Zealand is dismayed by the change. Yet this change did not go through a select committee process. Now, that select committee process would have been an opportunity for people in that sector to bring their concerns to the table and have an opportunity to speak to them, to justify why that particular tax credit was needed—why it made a difference.

The Minister has already told us that in terms of the fiscal cost, I don’t—oh, no, it’s different one that might have had a different cost. But it’s not a big fiscal cost, so it wasn’t to do with trying to balance the Government’s books or anything. I think the Minister told us yesterday that it might have made a difference of about $19 million in terms of the Government’s fiscals, so there’s no particular financial reason to do it this quickly. It’s just a matter of why, then, this bill had to go through under Budget urgency and why, in particular—because it does mean that the voices from the sector have not been heard, and that’s a real shame. I wonder if the Minister could explain exactly why it had to be done under Budget urgency.

Committee of the whole House

Thank you very much, Madam Chair. I’ll cover the questions that have been asked. I actually did cover the answer to the question around the urgency point last night, but just for those that didn’t hear: particularly for the Working for Families portion, we need to make the changes by December of this year in order to ensure that the systems changes within IRD are operational so that we can then notify the families for it to be effective from 1 April 2027. That’s why we need to pass it now. I would not have and we would not have sufficient time if we ran it through the standard tax bill to give that lead time, because the tax bill is not passed until March of next year. Again, repeating myself, but that is the reason around that. Having that certainty is also helpful to give people certainty in advance of next year.

The question raised by the Hon Dr Deborah Russell in regards to the donations portion is outlined clearly in the regulatory impact statement, and it involves tax integrity. We talked at length last night about this point in Part 1. The impact of this is on 350 donors, remembering this is donors that donate more than $100,000 or the maximum of their income, so, again, a very small group. What IRD has observed is that there is an increase within that area of donors using donor-controlled entities to, in effect, donate to a charity, which can sometimes be their own charity, and then getting a loan back from their own charity to them.

That is an area of tax integrity that the IRD has noticed is increasing. Hence why we’ve stood back and said we need to make sure that this is a level playing field, and that we’ve got integrity in the system. It’s not an open cheque book. The advice from Treasury and IRD is that this change will not happen—there is no evidence to indicate that it will have any impact on people donating to charity. In the vast majority of cases, people donate to charity because they want to donate to charity. They do not do so, particularly with a donation of over $100,000, because of the fact that they’re going to get a tax rebate from the Government. On that basis, we don’t see any issues.

Committee of the whole House

Thank you, Madam Chair. I just want to challenge the Minister a little bit, because I disagree that this is repetition. We did cover the dates yesterday, but it’s irrelevant to those specific sections in Part 1, and we specifically asked about the things with family credits, etc., and that was to do with the fact that the only calculator is from the financial year 2027-28, so people won’t necessarily see it until 2028.

The Minister added additional information that’s not relevant to the commencement date of the entire bill. In this case, for example, in clause 2(1), if there is implementation needed, what the Minister could have done is say that “This Act comes into force the day after Royal assent”, but in the individual sections, as we see here over and over again, in clause 6(2) and clause 5(3), additional dates are put in there. The Minister did answer, which I’m grateful for, but I want to challenge his idea that it is repetition.

I want to check the Minister’s response to clause 2(2)(b) on aircraft and why that was retrospective. I’m still waiting, if the Minister wouldn’t mind enlightening us with that particular date. The other thing I want to challenge, then, is actually clause 2(2)(a). This is about section 5, and it comes into force on the day after Royal assent, but then, again, in clause 5(3)—which this part relates to—it says it applies to anything on 4 December 2025. If we already have a retrospective date in clause 2(2)(b), which is 1 April 2026, why not make section 5 come into force on 4 December 2025? Clearly, the retrospectivity is not a factor here, in which case we would avoid having clause 5(3) altogether. If the Minister wouldn’t mind just highlighting why, in that case, it’s the day after Royal assent even though the effect is retrospective.

Committee of the whole House

Just in regards to that last point about 4 December 2025, we did, again, discuss that last night, as well. That correlates in regards to the consultation. In regards to the question by both members around why the non-resident contractors’ tax for aircraft is retrospective, the reason for that is that it avoids the need for transitional rules and it removes a tax obligation, so that no new obligations are being imposed retrospectively. In effect, if we didn’t do that, then we would need a mechanism to deal with this before the legislation is effective, and transition rules create additional compliance. We don’t want to do that.

Committee of the whole House

Madam Chair, I just want to follow up from the question I asked previously around the donations tax credit. I accept the Minister of Revenue’s reasons around tax integrity. Those are good reasons, and I support that. However, he still hasn’t answered the question of why this is being done under Budget urgency. Now, I note that the Chamber is fairly subdued this morning, and we all know that Budget agency takes a bit of time. There was no particular reason for this—the donations tax credit—to be included in the Budget urgency measures, so I wonder if the Minister could just speak to why that particular change had to go through under Budget urgency.

Committee of the whole House

Thank you. I’d like to ask about the title, and this is a serious question that is related to the Hon Dr Deborah Russell’s earlier point about the commencement date. I have this shadow portfolio—community and voluntary—and I can’t see that the title is indicative of what’s happening to this sector. The title at the present time is the Taxation (Budget Measures) Bill (No 3), but this has got nothing to do with the Budget, essentially, at all. This stands right outside of it. It doesn’t affect the Budget. It’s something that could have been done in a normal way, and it could have had that process associated with it.

I propose that we change the title here to reflect that reality. After all, that’s our job in the title: to always reflect the reality. I am suggesting that we change the title to “Taxation (Budget Measures and Sundry Measures Which Affect Our Charitable Sector, Particularly Reducing High-end Giving) Bill”, because that’s what it does. This is a blunt instrument. We have produced a rule here which caps the amount that the Government is prepared to give a tax rebate to. It isn’t money that they’re spending. A person is giving $100,000 and the Government is allowing a 33 percent reduction. It isn’t actually something where the Government is paying out money. In fact, it is an incentive for generosity. It allows people to give more. In this situation, we are reducing the amount that we are going to get. I point out to the Minister that what we are also doing is not just reducing the people who do that at the present time; we are reducing the capacity to incentivise that as a whole.

I know that somewhere like Australia, the incentives are almost always greater. These very same people will find a place where they can get the best bargain—the best bang for their buck—in terms of gifting. They’re often associated because they’re at the high end with both countries, so I would like the title to seriously reflect what we’re doing here. I’m not satisfied that this has anything, really, to do with the Budget at all. I’d like an answer from the Minister on why we wouldn’t have a title that reflects the two purposes that are going on in this bill. Thank you.

CHAIRPERSON (Maureen Pugh): Sorry, just for clarification, I’ve had a look and I can’t see an Amendment Paper (AP), so I’m just checking. Are you speaking to an AP?

No, I’m not speaking to a written paper. I’m speaking on the principle of changing the title of the bill to something.

CHAIRPERSON (Maureen Pugh): Yes, I understand—I understand. I just need to mark my sheet appropriately.

Committee of the whole House

Well, it does feel like we are coming to the end with those types of contributions. However, I will note Dr Lawrence Xu-Nan’s questions around the commencement clause. The drafting of that is very consistent with other tax legislation. In regard to Dr Deborah Russell’s question around why this is being done under urgency in relation to the charities portion, it is to give donors certainty regarding entitlements. They will have until the end of this tax year. These changes—the cap—will come in from 1 April 2027 and beyond. Between now and then, the rules remain the same, but we are sending a clear signal in that regard.

To the questions and points raised by Helen White, we are not reducing the amount of donations that people are able to give. What we are doing is capping the Government subsidy that is provided to those individuals on donations over $100,000 or donations that are equivalent to 100 percent of the donor’s income. That data that we’ve reviewed does not reflect or indicate that the change we are proposing will reduce the amount of money that people donate to charity. I’ll leave it there.

CHAIRPERSON (Maureen Pugh): I will take one more call to see if there’s any new material.

Committee of the whole House

Thank you, Madam Chair. I’m grateful, because this will actually be my last call in this committee stage. I, too, wish to address another title of this bill. It’s currently titled the Taxation (Budget Measures) Bill (No 3), but I suggest that a more appropriate title would be the “Taxation (Not the Budget Measures) Bill (No 3)”. Now, there’s a very good reason for that, because sitting on Inland Revenue’s website and in the Budget announcements yesterday, a great deal was made of all the tax measures, and, in fact, there were 10 tax measures introduced.

If we go through them, there was the “charities are not for profit” measures, sitting in this bill. That’s one of the 10. There was the non-resident contractor tax exemption for aircraft asset leasing. That is another of the measures—two of the measures, actually, in the bill. There was the “company loans to shareholders”; this is a good measure, something that needs to be done—three of the measures that are sitting in this tax bill. There are the changes to Working for Families, and we’ve discussed why it needs to be in here: to provide some certainty to people claiming their Working for Families tax credits—that’s sitting in this tax bill.

But then there are the other measures. Now, it’s interesting. There are the changes to the foreign investment fund rules. These are some changes which have been signalled; they are excellent changes which are extending the revenue account method to all taxpayers who have foreign investment fund income. That’s a good change, but it’s not in this tax bill. There are some non-resident contractors’ tax modernisation rules, announced yesterday as part of the Budget—not in this tax bill. There are changes to the research and development tax incentive—interesting changes—not in this tax bill. There are some changes to fringe benefit tax—announced yesterday, much heralded yesterday—not in this tax bill. There are changes to the thin capitalisation rules for foreign-owned banking groups—not in this tax bill. There are changes to financial arrangements rules to support migrants—not in this tax bill.

It’s interesting. Deloitte partner, Robyn Walker, who is very well respected in the tax community, had a bit of commentary in the media this morning and has been contacted around the tax changes in this Budget, and the two changes that she highlights are the changes to fringe benefit tax and the changes to the foreign investment fund rules. Excellent changes, she says, but they are not in this tax bill. In actual fact, this particular bill is characterised not by the Budget measures it contains but by the Budget measures it doesn’t contain. For those reasons, I think this bill should be renamed the “Taxation (Not the Budget Measures) Bill (No 3) 2026”.

Committee of the whole House

I move, That debate on this question now close.

A party vote was called for on the question, That debate on this question now close.

Ayes 67

New Zealand National 48; ACT New Zealand 11; New Zealand First 8.

Noes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 4; Ferris; Kapa-Kingi.

Motion agreed to.

CHAIRPERSON (Maureen Pugh): The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 1 replacing “Budget Measures” with “Working for Families Scheme Simplification and Other Matters” be agreed to.

A party vote was called for on the question, That the amendment be agreed to.

Ayes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 4; Ferris; Kapa-Kingi.

Noes 67

New Zealand National 48; ACT New Zealand 11; New Zealand First 8.

Amendment not agreed to.

CHAIRPERSON (Maureen Pugh): The question is that the Hon Julie Anne Genter’s tabled amendment to clause 1 replacing “Budget Measures” with “Company Loan Adjustments and Other Matters” be agreed to.

A party vote was called for on the question, That the amendment be agreed to.

Ayes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 4; Ferris; Kapa-Kingi.

Noes 67

New Zealand National 48; ACT New Zealand 11; New Zealand First 8.

Amendment not agreed to.

CHAIRPERSON (Maureen Pugh): The question is that Francisco Hernandez’s tabled amendment to clause 1 replacing “Budget Measures” with “Donation Tax Credit and Other Matters” be agreed to.

A party vote was called for on the question, That the amendment be agreed to.

Ayes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 4; Ferris; Kapa-Kingi.

Noes 67

New Zealand National 48; ACT New Zealand 11; New Zealand First 8.

Amendment not agreed to.

A party vote was called for on the question, That clause 1 be agreed to.

Ayes 88

New Zealand National 48; Green Party of Aotearoa New Zealand 15; ACT New Zealand 11; New Zealand First 8, Te Pāti Māori 4; Ferris; Kapa-Kingi.

Noes 34

New Zealand Labour 34.

Clause 1 agreed to.

CHAIRPERSON (Maureen Pugh): The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 2(1) replacing “1 April 2027” with “1 July 2027” be agreed to.

A party vote was called for on the question, That the amendment be agreed to.

Ayes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 4; Ferris; Kapa-Kingi.

Noes 67

New Zealand National 48; ACT New Zealand 11; New Zealand First 8.

Amendment not agreed to.

CHAIRPERSON (Maureen Pugh): Can I just remind members in the House that votes are taken in silence.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 2(1) replacing “1 April 2027” with “1 July 2026” be agreed to.

A party vote was called for on the question, That the amendment be agreed to.

Ayes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 4; Ferris; Kapa-Kingi.

Noes 67

New Zealand National 48; ACT New Zealand 11; New Zealand First 8.

Amendment not agreed to.

CHAIRPERSON (Maureen Pugh): The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 2(2)(a) replacing “the day after Royal assent” with “1 April 2026” be agreed to.

A party vote was called for on the question, That the amendment be agreed to.

Ayes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 4; Ferris; Kapa-Kingi.

Noes 67

New Zealand National 48; ACT New Zealand 11; New Zealand First 8.

Amendment not agreed to.

CHAIRPERSON (Maureen Pugh): The question is that the Hon Julie Anne Genter’s tabled amendment to clause 2(2)(b) replacing “1 April 2026” with “a single date set by Order in Council” be agreed to.

A party vote was called for on the question, That the amendment be agreed to.

Ayes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 4; Ferris; Kapa-Kingi.

Noes 67

New Zealand National 48; ACT New Zealand 11; New Zealand First 8.

Amendment not agreed to.

CHAIRPERSON (Maureen Pugh): The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 2(2)(b) replacing “1 April 2026” with “1 July 2026” be agreed to.

A party vote was called for on the question, That the amendment be agreed to.

Ayes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 4; Ferris; Kapa-Kingi.

Noes 67

New Zealand National 48; ACT New Zealand 11; New Zealand First 8.

Amendment not agreed to.

CHAIRPERSON (Maureen Pugh): The question is that Francisco Hernandez’s tabled amendment to clause 2(2)(b) replacing “1 April 2026” with “1 April 2027” be agreed to.

A party vote was called for on the question, That the amendment be agreed to.

Ayes 55

New Zealand Labour 34; Green Party of Aotearoa New Zealand 15; Te Pāti Māori 4; Ferris; Kapa-Kingi.

Noes 67

New Zealand National 48; ACT New Zealand 11; New Zealand First 8.

Amendment not agreed to.

Clause 2 agreed to.

Bill to be reported without amendment.

House resumed.

CHAIRPERSON (Maureen Pugh): Mr Speaker, the committee has considered the Taxation (Budget Measures) Bill (No 3) and reports it without amendment. I move, That the report be adopted.

Motion agreed to.

Report adopted.

ASSISTANT SPEAKER (Greg O'Connor): This bill is set down for third reading immediately.

Third Reading