Income Tax (FamilyBoost) Amendment Bill

Members, we now come to clause 5. This is the debate on “Section MH 5 amended (FamilyBoost tax credit abatement)”. The question is that clause 5 stand part.

Thank you very much, Madam Chair. For members, clause 5 of the bill proposes reducing the abatement rate from 9.75 percent to 7 percent, applying to households earning over $35,000 per quarter or $140,000 annually. This increase of the maximum qualifying household income per quarter increases from $45,000 to $57,286, or equivalent to $180,000 increasing to $229,144 per year. Accordingly, households with a quarterly income exceeding $57,286 would become ineligible for FamilyBoost.

In regard to a question on distributional analysis and income distribution, I must refer members to the fact that in the regulatory impact statement (RIS) under Figure 1, which relates to clause 5, this analysis is actually included in there. So if the members review the RIS, they will find the response in regard to that point, which is relevant.

Thank you, Madam Chair. I want to just first pick up on two questions that I asked previously to the Minister that I think are still worthwhile. Thank you to the Minister for addressing my consultation question, but I also wanted to check with the Minister in terms of my question around the 71 percent assumption that was made, as well as the question on the New Zealand Bill of Rights Act.

In terms of clause 5, I think clause 5 is where we are able to look at some of the additional options that have been presented here. I guess the predominant question I have is: why 9.75 percent to 7 percent, in terms of lowering the abatement rate? With that, I would like to speak to my tabled amendment, which is lowering the 7 percent to 5 percent, in terms of abatement. I think it just allows more families to have the ability to access FamilyBoost, as well. But I guess the question around that, which I guess I’m a little bit concerned by—and this comes back to the 71 percent, when it comes to the eligibility criteria, which the abatement rate of this section of this clause is a large part of. I’m drawn to paragraph 54 of the regulatory impact statement under option 3, where on the first page they talk about we’re never going to achieve 100 percent. We’re making an assumption that 71 percent is realistic, but in option 3, under paragraph 54, it says that the risk is that there is an uptake higher than 71 percent.

Is it true, then, that the Minister is making an abatement rate from 9.75 percent down to 7 percent on the premise of the 71 percent assumption in order to lock in the 71 percent accessibility as a target and it shall not go more than that? I guess that is a concern for me, because if that is not the case, I would ask the Minister to seriously consider my amendment to lower the abandonment abatement even further to 5 percent so that, in that way, there are more families who are eligible and we could potentially reach that 100 percent uptake rate, which then would be more in line with my original question on the purpose of section MH of the Income Tax Act. Thank you.

I want to explore some issues around the interaction of the abatement rate and the previous clause; they do sort of do fit together. I don’t want to go too far. We’ve done the previous clause, so it’s reference only.

Very roughly, if we think about it, clause 4 covers the amount of the rebate that’s available to people. Clause 5 covers the families who can claim it—all right? That’s quite an important distinction. In terms of clause 5, there are a couple of questions that I think we do very much need to understand; actually, three I want to understand. The first is just a point of clarification. I’m not quite sure, because we’ve only had this bill for less than 24 hours—and good, but not that good. I just want to understand where the abatement starts kicking in from. I think from the way I’m reading it that it still kicks in from $140,000. It’s just that the abatement is now slower, so it goes further. But it’s neither here nor there; it’s just a point of clarification.

The real question I want to ask, though, is around just how far out the abatement rate goes, because what it means is that now that families who are earning up to $229,000 max—but, actually, a family who’s earning $220,000 a year can still get an abatement, can still get some money back under FamilyBoost. It’s only $160 a year, but that’s still a nice little chunk of money. A family that’s earning $200,000 a year can still get $510 a year back. Those are pretty high household incomes. I appreciate that families are under strain, that we have people who’ve perhaps—particularly in that particular age group where you have young children who are in childcare—there’s a whole lot of pressures on household budgets. There’s likely to be mortgage pressures, certainly food pressures, ordinary cost of living pressures. There are childcare pressures. I remember it well. I think a lot of us have gone through that experience. Nevertheless, a household income of $200,000 is a high income.

Now, the Minister has said that the idea here is really wanting to extend the reach of FamilyBoost to ensure it got to more families, but there was a choice to be made here, because another way to ensure it got to more families would have been to work with families to make sure they’re claiming the rebate in the first place. The first set of changes in clause 4 makes the rebate more worthwhile. People get more money back for each dollar of childcare spent—all right? The second change in clause 5 extends the number of families, but it does that by increasing the income thresholds or decreasing the abatement rate.

The alternative was to spend more on outreach, to spend more time seeking out the Pasifika and Māori families who we know are missing out on FamilyBoost. The alternative was to spend a bit more time and effort in making it easier for people to claim the rebate and making sure that people actually got it. We know that people are missing out on it. We know that the take-up rate was around 51 percent, up to 64 percent now. We know that the modelled uptake is going to be around 71 percent. But the alternative strategy for ensuring that more families got the rebate was to reach harder into the communities that aren’t claiming it and to work harder on getting it to those families who aren’t getting it in the first place.

I said in a previous contribution that there are two mistakes that a Government can make in terms of trying to pay out benefits or welfare or rebates or whatever. One is the mistake of being too generous, so it goes to people who don’t need it. Are we making that mistake here by having it go to families who are earning more than $200,000? The other mistake is where families who need the rebate aren’t getting it in the first place. It does seem to me that more work needs to be done to ensure that families who weren’t otherwise claiming the rebate are getting it now. Why that choice, Minister, to simply extend the abatement range rather than making a greater effort to get into our most socio-economic deprived communities?

Thank you very much, Madam Chair, for the opportunity to—

CHAIRPERSON (Maureen Pugh): At your leisure, Mr Watts.

Hon SIMON WATTS: Very good, appreciate that. To the questions noted by the member in regards to why “9.75” to “7” percent, the abatement rate decreased to 7 percent and the relevant changes that we had made in regards to, or are proposing to make in regards to the rebate rate increase to 40 percent are both within the original Budget 2024 funding allocation for FamilyBoost, so that is the rationale of why 7 percent.

In the context of what seemed to be a little bit of confusion around the 71 percent: to clarify, the 71 percent refers to the number of families likely to take up the payment out of the total eligible families for FamilyBoost. That clarifies those two.

Thank you, Madam Chair. Thank you for the opportunity to take my first call on clause 5. Again, the bill is under urgency. We haven’t had a chance to be able to actually analyse it at length and with the officials, as well. I appreciate, again, that Government members are trying to shut down the debate, but at least allow us to actually analyse the bill if you’re not going to add anything yourselves.

To clause 5: it’s a similar question to that which I asked at clause 4, which the Minister was not able to respond to. In subsection (3), it provides a different commencement date, which is the same commencement date that is in clause 2. My question to the Minister, at the time, for clause 4 and now for clause 5, is: why do you need subsection (3)? Why do you need a commencement date in subsection (3) for subsections (1) and (2) and clauses 4 and 5? I’m hoping he’s able to provide an answer—whether that’s just part of a drafting issue or whether that is just a style issue; it would be good to know—because those are the types of questions one would ask if we were given a proper select committee process. We would have asked it, probably, as part of the revision-tracked version of the bill.

The second part of my contribution on clause 5 is actually to speak in support of Dr Lawrence Xu-Nan’s tabled amendment to clause 5, which is to replace the “7” with a “5”, which goes down to the tax credit abatement rate. The reason why I stand in support of it is because, similar to other tabled amendments today that have been put forward by Opposition members, these amendments actually fit within the purpose of why we are here for this bill. It’s set out very plainly in the regulatory impact statement (RIS): it’s to increase the number of recipients eligible for FamilyBoost. It’s to increase the payment amounts for FamilyBoost. Again, to the third point, which is where my question to the Minister is: could this fit within the fiscal envelope or the appropriations that he referred to before, given the significant underspend on this policy, to date?

Why I support Dr Lawrence Xu-Nan’s tabled amendment is because, again, it gives families more money. If the Government decides to vote down, yet again, another tabled amendment that is helping to increase eligibility, increase money that doesn’t get cut back for families because of an abatement threshold—I don’t quite understand why Government members would vote down such tabled amendments which actually help their bill. We already know this bill is here because it was a policy failure. We already know that this bill is here because the Government has to try and increase the eligibility—

Ryan Hamilton: That’s your opinion.

Hon BARBARA EDMONDS: —increase the eligibility. No, it’s actually here, on page 1 of the RIS: “increase the eligibility”. That is why we’re here—

Ryan Hamilton: That’s the reason?

Hon BARBARA EDMONDS: —and if the member Ryan Hamilton is saying that it’s not the reason why we’re here, you can actually read right through the RIS the policy problem that you’re trying to fix with this bill. Since the member has clearly not read the regulatory impact statement, I can take him through the policy problem—the policy failure—that this bill is intending to address. In response to his interjection, it’s around the following factors that may be influencing the uptake in the level of financial assistance. The policy design: the regulatory impact statement says, “a feature of FamilyBoost is that it covers unsubsidised fees.”

I’m just responding to the interjections from the Government side of the House, which I think is fair. “As such, the original estimate of eligible families may have been too high as the model included all families who appeared eligible based on their income … Additionally, the design of the policy as a rebate model requires families to pay for ECE fees before receiving a FamilyBoost payment.” This is a policy failure. To the second point—to the interjection by Ryan Hamilton: compliance costs; “the current model requires families to upload their ECE invoices”—

CHAIRPERSON (Maureen Pugh): Can I just ask the member to address her comments to the Minister, not to have a debate across the Chamber?

Hon BARBARA EDMONDS: Fair enough, Madam Chair, and particularly because the Government members don’t want to add any contribution themselves. So to the Minister: again, the policy problem, which a member from the Government side of the House was questioning, which is this is not a policy failure. The compliance costs, the perceived benefit of the policy, the transient population—that’s why this bill is here; to fix a policy mistake and a failure by that side of the House.

I move, That debate on this question now close.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 5(1) replacing “7” with “5” be agreed to.

Dr Lawrence Xu-Nan’s tabled amendment to clause 5(2) replacing “$1,560” with “$1,950” is ruled out of order as being inconsistent with a previous decision of the committee.

Madam Speaker, the committee has considered the Income Tax (FamilyBoost) Amendment Bill and reports it without amendment. I move, That the report be adopted.

This bill is set down for third reading immediately.

Third Reading