Taxation (Budget Measures) Bill (No 2)

Members, the committee is resumed. When we suspended last night, we were considering Part 1 of the Taxation (Budget Measures) Bill (No 2). Just to remind members, in the past, one approach has been for members to work through provisions or policies in sequence so that this tends to produce a more useful and focused debate. If members are wanting to discuss particular provisions, it would be useful to cite the clause number. That will assist other members who want to speak about the same provision. Part 1 contains the Investment Boost policy, changes to Working for Families, including Best Start, and KiwiSaver is in Part 2.

I did speak to the Chairperson who was in here last night, who feels that we are largely working through the Investment Boost, and I know that the Hon Dr Deborah Russell has set out a bit of a context for how we should work. He also indicated that we’d had quite a number of questions on it, so what I really want to do this morning, for the very first little part, is just focus on anything that might tidy up that Investment Boost section that’s new and that wasn’t asked last night—it isn’t a speech, but it’s a question—and I suggest we then start moving on to the Working for Families changes, following that. So this is in no way trying to shut anything down, but just to keep going with the process that we were up to.

Madam Chair, thank you for those directions. I think it’s a really important direction. I want to focus specifically on clause 5. The particular part of clause 5 is the introduction of new Subpart DI 4, “Meaning of new investment asset”, and what I am deeply concerned about is the fiscal risks associated with this particular policy. Now, this is not something we discussed yesterday. The reason we didn’t discuss it yesterday is because it takes time to get to grips with new legislation and understand the import of what is going on.

The interesting thing about this partial expensing is that it offers a substantial tax benefit for new assets in New Zealand. It means that people can get an immediate tax benefit from a new asset, and amongst the new assets that could be considered there are things like commercial buildings and, in particular—

Sam Uffindell: We discussed this yesterday.

Hon Dr DEBORAH RUSSELL: Shush, and let the adults talk. Now, I want to—[Interruption] And here is the problem.

CHAIRPERSON (Barbara Kuriger): That’s what we get with interjections, so let’s come back to Subpart DI 4.

Hon Dr DEBORAH RUSSELL: So we’re talking about the fiscal risk. We did not talk about the fiscal risk at all yesterday, and it is substantial. It is $1.5 billion a year allocated for the tax break that comes through the partial expensing, but that particular tax break could be eaten up very, very quickly by just one or two mines or by a few commercial buildings, and, as Newsroom has pointed out overnight, if every single small business invests $10,000, there goes the tax break, just like that.

I looked in the statement of fiscal risks in the Budget Economic and Fiscal Update, and I couldn’t find a specific fiscal risk associated with this particular policy. What I want to know from the Minister of Revenue is to what extent he and the Minister of Finance thought about whether or not this policy could just blow out—that there is a really substantial fiscal risk associated with it. We actually need to know, because the Minister of Finance has promised us she is going to balance the books by about 2028, but if this policy blows out, we’ve got a real problem.

This tax break can apply to a whole new commercial building, and we know what they cost to build. They can apply to an oil rig. We could just get a few oil rigs in there, new to New Zealand, and suddenly—

Arena Williams: A convention centre.

Hon Dr DEBORAH RUSSELL: —it’s gone—or a convention centre.

So I really want the Minister to now talk about something we haven’t talked about at all, and that is the extent to which he and the Minister of Finance have considered the fiscal risks associated with this. It is serious, and I would like to know.

Thank you very much, Madam Chair, and, look, a very good morning, everyone. Welcome back to the growth Budget, and what a great Budget it is.

I don’t mind doing a basic lesson in what depreciation is for the member because, in effect, what we are doing is increasing the rate at which people can claim a tax deduction by increasing it in the first year and the balance will be claimed for the rest of the asset life. This is a timing difference. We are bringing forward that ability to claim that tax deduction. We’re not creating some new world or new paradigm of other aspect; we are simply moving that benefit forward so that New Zealand businesses can achieve a tax deduction from yesterday, and get the benefit of that in terms of less tax this year. That is a significant investment and opportunity for them as a business, but it in no way has any impact on what would be a normal rate of depreciation on any economic asset over the life of that asset. So the whole premise of the question is uninformed and without basis.

Our policy is very much focused on delivering that economic growth, and, heck, I mean, I guess some people in the House are concerned about too much economic growth. But on this side of the House, we think a little bit differently. We think economic growth is a good thing. It sort of helps us with a range of factors, including higher-paid jobs, a better standard of living, and more tax revenue flows, and—

CHAIRPERSON (Barbara Kuriger): That’s true, but that’s not what the member asked the Minister, thank you.

Hon SIMON WATTS: Well, the member asked about the risks in regards to the policy, and I have clarified that it is a depreciation policy which is well articulated in accounting standards.

Thank you, Madam Chair. As it turns out, I don’t need a lesson in how depreciation works, and I am well aware that this is a timing difference only, so the actual fiscal cost comes from the time value of money. However, I remind the Minister that yesterday, when we were talking about the rate sitting in here, we asked why it was set at 20 percent and why wasn’t it 25 percent, why wasn’t it 50 percent, why wasn’t it 10 percent, and so on—why were we doing this partial expensing at 20 percent? The response the Minister gave—and I don’t have the exact words—was that that value was particularly set at 20 percent partial expensing because it was to do with containing the fiscal expense that was associated with this policy. In other words, he said that we couldn’t set it higher because we needed to set it at a level that contains the fiscal expense.

Now, that suggests that there is a fiscal risk associated with this policy and that there has been some analysis of how much it was going to cost. We know it is going to cost. According to the Minister’s own figures, the Treasury officials and the IRD officials have projected that it’s going to cost $1.5 billion a year, but in the midst of all that, the implication there is that this cost could well blow out. That’s the analysis that has come to us from other tax experts overnight. It’s the analysis that’s from a number of places, and I’m going to refer to Newsroom and to interest.co.nz. These people have identified that this is a fiscal risk. Why is this fiscal risk not listed in the statement of specific fiscal risks in the Budget Economic and Fiscal Update?

Now, I’ve had a look at the specific fiscal risks and it is simply not there, yet it seems to me that this is a fiscal risk. Even if it can’t be quantified, it should be listed. There is a risk—why is not listed there?

Thank you, Madam Chair. Mōrena to the Minister of Revenue. I’ve got a number of questions, and I’d like to start with new section DI 4 in new Subpart DI, “New investment assets”, in clause 5. I would ask the Minister whether we’re talking about planting here—“listed horticultural plants”. I can imagine some that we might have some different lists of there, but what I want to ask is whether it would be appropriate to add native plants intended for regeneration. There are some quite bulk planting ideas either for carbon sequestration or, if we get there—and I think the parties are relatively united in this—eventually, biodiversity credits. I think it would be a shame if it didn’t also apply to those.

On the broader issues of the effect of this bill, I heard yesterday evening the Minister saying that he didn’t intend to create any distortion across different businesses. However, surely this 20 percent expensing allowance means that you are helping capital-intensive businesses, rather than the creative industry, and what we’re talking about there are the arts, fashion, publishing, film, software, gaming—I have members of my caucus that are experts in some of those areas, and that is an opportunity for high-paid jobs, good jobs, and fulfilling jobs that actually are very light on the environment.

You know, here we are in the smart, green capital. We’ve got fantastic industry here, and I don’t think they’re getting the opportunity. This is about one kind of industry, not the other. So addressing that issue of distortion of markets, and what kind of businesses are likely to be invested in because of this, is one issue.

With the last question I have for the Minister, I didn’t even realise it was a change to the example. In the example used in new section CC 15 in clause 4, why on earth was the change made to put in a yacht as a great example of business deduction? I mean, who, when they’re trying to struggle to feed their kids and when they’re struggling to pay for early childhood care, is really pleased to see a yacht being used for business purposes? Now, there are some dolphin-watching yachts, there are some yachts that go round the Wellington Harbour, but I would argue that the majority of the yachts are really not a prime investment economic growth. This looks really dodgy. I’d like to know the Minister’s opinion on yachts for business deduction.

Just before I call the Hon Simon Watts, I have to tell the people on my right that when you all talk at once, no one can hear a word any of you are saying, so please just be a bit more toned down in your interjections. As I keep saying, interjections are fine, but that was a barrage.

Thank you very much, members, for those comments, particularly from my left. In regards to the specific risks that were noted by the prior member, I had referenced disclosures on page 74 of the Budget Economic and Fiscal Update which outline the general policy changes and the implications in regards to the question around risks.

There was also a question in regards to horticultural plants. The view in that context is that those are generally available and are defined as part of the Income Tax Act in the context of what plants are there.

To the comments in regards to yachts: well, look, the reality is—and to all those New Zealand tourism businesses out there that do great things for our country, and they do so on our oceans and in our harbours and assets—yeah, it’s an example of a mixed-use asset, and the rule covers that context as well. I won’t cover anything more on that.

In regards to new Subpart DI in clause 5, and also in regards to the questions by members on new investment assets, I think we’ve had a number of those questions, including last night as well, but I’ll go through it again, just for the benefit of doubt. Investment Boost is available for most assets that are eligible for depreciation or for depreciation-like deductions. These assets include most depreciable property, including improvements to depreciable property, improvements to farm and forestry land and aquacultural businesses, and also, as noted, expenditure on the planting of horticultural products. Investment Boost would also be available for assets acquired in petroleum development expenditure and mining development expenditure, as this Government has outlined.

Investment Boost would not be available for assets that are residential property or fixed-life intangible property, including permits and rights. For assets that are used for deriving income and for some other purpose—so, in effect, a mixed-use asset such as the yacht example that I have noted—Investment Boost would only be claimable to the extent that the asset is being used for the purpose of deriving income.

I hope that that sufficiently covers the questions in regards to new investment assets, the definition, and the clauses, as asked.

Is someone wanting to take a call over this side—

Hon Member: Yes.

CHAIRPERSON (Barbara Kuriger): —because we have not finished Part 1. So if it’s a call, I’ll—

Hon Member: They’re all trying to take a call!

CHAIRPERSON (Barbara Kuriger): Thank you. I’m going to call the Hon Dr Deborah Russell because I think we really are getting towards the end of Investment Boost and I do want to move on to Working for Families. I am going to allow another call, and then I think we will move on.

Thank you for the direction, Madam Chair. I do have one more very specific question, but before I go to that, I do want to carry on with this issue of fiscal risk. It is important. The Minister directed me to page 74, I think, of the Budget Economic and Fiscal Update. Could I direct the Minister to page 89 of the Budget Economic and Fiscal Update, where it says, under the heading “Forecast Dependent on a Status Quo that is Uncertain”, and then under “Revenue”, it has “Investment Boost (Revenue)”, and it says, for the Minister’s benefit, “The fiscal and economic impacts of Investment Boost are significant and have been based on some assumptions and judgements which have a degree of uncertainty. The modelled impacts use aggregate macroeconomic data as an input together with assumptions on coverage within the tax base, and forecasts of growth in investment. Variations in any of these factors can materially affect the fiscal and economic impacts of the policy.”

That’s a pretty significant fiscal risk sitting right there, and it says it’s an unquantifiable fiscal risk, so I really am asking the Minister to address this issue. Is there a downside risk that not as much will be invested in this policy as the Minister and his colleagues had hoped? What impact will that have on the projected growth? On the other hand, what is the upside risk of that—that much more will be spent on this policy than the Minister had thought was going to be the case? What impact is that going to have on the Budget deficit over time? Does it mean that the Minister of Finance’s projections of when we will be back into surplus, using either her spurious little OBEGALx or the traditional OBEGAL measure—does it put those projections at risk?

Sitting here, on page 89 in the Budget Economic and Fiscal Update, is an acknowledgment that there is a fiscal risk associated with this policy. I want to know more about the possible upsides and downsides, and to what extent this could actually impact on the growth projections or impact on when this country gets back to surplus.

Yeah, thanks very much, Madam Chair. Acknowledging that this question isn’t about a specific clause in Part 1 and it is also a repeat of a question already asked, I will simply state the obvious, which is that all economic models have assumptions and judgments built into them, and that is standard practice in the calculation of economic growth and in deriving the implications and decisions that some 600,000 businesses may make from yesterday in regards to their investment decision-making. That is standard practice for any Government, and the assumptions and judgments made as part of that are considered appropriate by this Government.

I now am asking for questions on Working for Families, including Best Start. So we are moving on from Investment Boost and we are going to Working for Families, including Best Start.

Madam Chair, thank you for your very clear directions, and I do genuinely appreciate them. It’s much easier to work this process through in an orderly manner with those directions.

We do have some serious questions about the Working for Families policy. Now, the interesting thing is that it’s only really a couple of clauses in the bill, but they have a really significant impact. I want to open with a policy discussion. This is where we get to discuss the policy around Working for Families and the changes here. What we know from the regulatory impact statement—and it’s on page 3, I think, of the regulatory impact statement, looking at the costs and benefits of this policy. We know that—here it is, at page 3—around 61,000 families would receive a reduction of income in these changes to Working for Families. So I want to know from the Minister why he thought it was acceptable for 61,000 families to end up with less income rather than more, and to what extent these families are ending up worse off in order to pay for other expenses within the Budget. Thank you.

Just a very quick question from me to the Minister. Regarding where the threshold has changed around the Working for Families tax credit, we’ve heard commentary to say that in some ways this just lifts the threshold and, therefore, the squeezed area has moved upward. In terms of incentivising and encouraging families, when we think about economic growth and about productivity, it is, arguably, a disincentive for people to be able to increase their income when they are in that slightly higher bracket, because as soon as they do, they would be in the 64,000 families that would lose the credit.

I’m wanting to understand what consideration was given—again, as a policy question—to how to make sure that there are adequate incentives in the system to not have people then drop out of, for example, secondary employment or have them not want to move up into a higher, more specialised field in their current employment because they then risk losing this abatement. It really just is about the thresholds changing, but there has been commentary about this on Radio New Zealand this morning, which I think is quite appropriate, and I’d like to know what thought the Minister and his officials have given to that.

Thank you very much, members, for the question, and I’ll take a little bit of time just to outline some of the key points in regard to this. First and foremost, it is really, really important to acknowledge that no families will see an actual reduction in income as a result of the Best Start change, as only children that are born on or after 1 April 2026—next April—are going to be subject to that. So that is a really important aspect in terms of family impact.

Treasury estimate that 61,000 families will receive less than they would under current settings, by an average of $43 a fortnight in 2026-27, and of these families, 89 percent will have taxable income of over $100,000. This includes 53,000 families not eligible for Best Start following implementation, and 9,000 families earning between $79,000 and $97,276, who would receive an abated amount of Best Start in the first year of the child’s life. Of those 9,000 families who will receive an abated Best Start in the first year, they have incomes of between $79,000 and $97,000, as I’ve noted. The $79,000 is the Best Start abatement threshold and the $97,000 is the point at which entitlements are cut off—just to clarify those two points.

Lastly, it’s important to note that of the 53,000 families who became ineligible for Best Start, those families are already earning over the Best Start cut-off point, which is $97,000. These are targeted interventions. No families will see an actual reduction as a result of the Best Start change, as they only apply to children born on or after 1 April 2026.

I want to engage with this issue of families earning—I think the Minister said—over $97,000. The trouble is that I think that’s two workers within the family on minimum wage, so these are some pretty low-income families who are working quite hard, or it may be someone who’s on a little bit more than that, maybe. So they are actually quite low-income families, and, in effect, what we’re saying is that these families are rich enough not to need any assistance from the State.

Now, in terms of, I think it was, 53,000 families on Best Start, here’s the curious thing: if a family is working minimum wage jobs or if they’re working just slightly above minimum wage—maybe they’re a library assistant, so they’re not even getting pay equity these days; they might be getting the living wage, but it’s still a comparatively low wage—and then, when a baby arrives in that family, no matter what, there are extra expenses. Is the Minister saying to us that families who are earning two minimum-wage incomes are, in fact, rich families and are rich enough not to need assistance from the State? That seems to be the implication of what he was saying in that particular call.

No, we’re not saying that. What we are saying is that we are targeting this policy in a way which ensures that those on low and medium incomes are the most benefited by the context of the changes that we’ve made. We make no apology for targeting the benefits of our policy to those who need it most, and we can argue all day long in the context of where that threshold is. But this Government has set the abatement threshold at $97,276, and we believe that that’s an appropriate level to ensure that that policy is targeted to those who need it most.

Thank you, Madam Chair. I have two questions for the Minister around clause 7 of the bill, around the family credit abatement. Now, I hear what the Minister is saying, and I also think that adjusting the threshold from $42,700 to $44,900 is a good step. However, I wondered—looking at the regulatory impact statement (RIS), it seems like that was the only threshold that was considered and there was no other threshold that was considered. What we’re seeing here is not so much in terms of where we are looking at something that is going to benefit lots of lower-income earners, as opposed to us just, basically, catching up with the Consumers Price Index, which is what I’m seeing here—so if I can get that clarification from the Minister. In which case, my question is: why did the Minister not consider a higher threshold, where, again, more families would be able to benefit? That’s the first question.

The second one is around the second part, which is around the abatement rates. Currently, when we’re looking at Working for Families payments, we’re looking at an abatement of 27c in the dollar—so, for every dollar earned over that, the payment reduces by 27c, and that’s being increased to 27.5c. In fact, that is, I feel, going to be a harsher punishment in some ways, because it’s 0.5c more per dollar, whereas, again, looking through the RIS and looking through the thing, didn’t we see a reduction in terms of that particular abatement rate—making it lower, for example—to make it more accessible for families who are above the abatement threshold? So that’s my second question.

My two questions are around the fact that we didn’t consider higher thresholds in the first place—because it doesn’t seem to be an option that was mentioned in the RIS—and also in terms of the 27c going up to 27.5c. Why didn’t we consider making it a little bit lower?

With that, my final question is whether the Minister would consider my amendment on this, which would then adjust the abatement rate to $61,000, which is a higher increase, and would also reduce gradually the rate to 18c in the dollar, as opposed to the proposed 27.5c in the dollar, because this would mean that, I think, hundreds of thousands of families would then have more money through a simple and improved Working for Families system, as opposed to what we’re seeing here. Would the Minister, then, finally consider my amendment?

CHAIRPERSON (Barbara Kuriger): Could you please quote the number of your amendment?

Dr LAWRENCE XU-NAN: I don’t think I have a number, because it’s a tabled amendment.

CHAIRPERSON (Barbara Kuriger): Oh, OK. You’ve outlined it anyway, so we’ll find it.

Dr LAWRENCE XU-NAN: I’ve outlined it. It should be on the Table.

Thank you. We’ll find it.

Yeah, no, I’m familiar with the member’s amendment. Sadly, I won’t be accepting that change, and I’ll give some context on the reasons why. The point around the threshold is also in the context of ensuring that the changes that the Government has made are fiscally neutral—so, therefore, ensuring that the changes are targeted—and then the threshold is set.

There was a question in regard to the minimum wage. Well, the threshold is set above what a two-couple family who are both on minimum wage would be earning, which is in region of around $96,000. The threshold is set above that level and, again, is representing that the Government wants to target these initiatives to low and middle income earners.

There are a couple of quite technical points I would like to consider. One is that there is, as we know, quite an interaction between the various Working for Families tax credits, and one of them is the minimum family tax credit—the MFTC. Anyway, what it does is that it ensures that the minimum income earned by someone in work is just a little bit higher than the income earned by someone on benefit. The objective is to ensure that it is actually worth going into work, and it’s a particular tax credit that’s been there since, I think, very early on in the start of the Working for Families scheme. It’s actually a really complicated interaction between the other Working for Families tax credits and the benefit system, and so on.

What I’d like to know from the Minister—now, I know that the minimum family income tax credit gets adjusted every year. But I’d just like to know to what extent his officials engaged with how that particular tax credit is going to need to be adjusted and when we’re going to see that adjustment coming through in legislation. Because it’s so complicated, I can’t work it backwards myself, so I’m not saying it ought to have been in this legislation, but, presumably, some work has been done to make sure that that minimum family tax credit still works in the way that it was intended to work through. So that’s a little complicated, but I’m hoping that the Minister can just shed a wee bit of light on that.

Ata mārie tātou. I just wanted to take a brief call in support of my tabled amendment. My tabled amendment is really about the honour and integrity of the New Zealand National Party, because in their pre-election fiscal plan, they said that they would have the abatement rate at $50,000. I’m not saying that they’ve deliberately misled the country before the last election. I think it’s probably just a minor oversight of $5,100, but it’s an oversight, none the less, and I think it needs to be corrected. I’d encourage the Minister to accept the tabled amendment and uphold the mana of the New Zealand National Party. Tēnā tātou.

Thank you very much, Madam Chair. I have a couple of questions in relation to clause 7, which amends section MD 13, and that is specifically relating to raising the threshold at which Working for Families tax credits start to abate, and also the rate at which they abate. I acknowledge that some of this has been done in order to recognise inflation, but it’s important. I just would like to know from the Minister of Revenue: back in 2023, National made some promises in terms of that, and I would just like to ask him to go back and check his notes to see what specifically was promised back in 2023 and whether that actually meets what’s being delivered in this bill.

My main point that I’d like to speak to in relation to those abatement thresholds is that we know that they’re clearly defined in the tax Act, and we know that the threshold is not indexed to wage growth or inflation and they can, in fact, be amended by primary or even secondary legislation. The abatement rate can be amended, and so as part of looking back at the 2004 and 2007 Working for Families introduction, a single abatement threshold was set at $35,000, with an abatement rate of 20 percent. Since 2006, the abatement threshold has been increased on three occasions, with the latest being in 2018 with that increase to the current threshold of $42,700.

Now, with the legislation that has already been processed that relates to pay equity, there will be a number of people who are earning and currently claiming the Working for Families benefit who will continue to need that support because their wages won’t increase. They may have been entitled under the previous pay equity legislation to be in line for a pay equity claim that would have raised their wages.

So my question to the Minister is this. If it goes to this level of calculating the abatement thresholds, the Government must have done some calculations to understand what the impact was not only of not providing pay equity settlements for the 33 claims that were under way but also for all of the other areas that had the potential to proceed through the pay equity process. We do note that changing that threshold for those female-dominated professions and lifting that up to 70 percent has excluded some professions like high school teachers, and I think also that some corrections workers fall into that area, as well—there are a couple that are at 68 percent or 67 percent—and so now those areas are excluded from being able to make a pay equity claim.

So my question is this: if we’re looking at this part of Working for Families, surely the public of New Zealand, who are not able to submit at select committee because of the urgency motion—surely, we should have an ability to understand how much more taxpayers in Working for Families will be paying as a result of those 33 different claims now having to need Working for Families tax credits, and also needing to qualify for it, because if their wages had increased over time through pay equity claims, then many of those women would be at a higher level, where they would have been financially independent and been able to keep paying for butter at $10—or it’s a bit cheaper at Costco—if those claims had proceeded.

The Minister must have some notes there about understanding what the cost to New Zealanders is under additional Working for Families payments, given the fact that those pay equity claims have, effectively, been shelved by this Budget. I’d also like to point out that a lot of measures in this Budget have been paid for by working women.

Thank you, Madam Chair. I have a short question for the Minister that I will preface with a little bit of commentary just for context around Best Start. Just for the Minister’s reference, I’m working off the commentary on the bill from Inland Revenue, at the final page—page 26—and then I’m also working off the regulatory impact statement, at page 15, bullet points 40 and 41. So that’s just for the Minister’s reference, and I’m noting that these are the kinds of questions I would have asked in a select committee process to be included in the departmental report, just in terms of the impact of the policy. The bill commentary, obviously, discusses the impact on the different tax years but also what applicants will need to undertake to be compliant and to access the Best Start payment—particularly with the changes in years—and it gives some examples of a family in terms of when their child was born. But the change to the section in the Act is, essentially, saying that prior to a child turning one, it’s now being means-tested, so there will need to be an application.

My concern, and my question for the Minister, is—I’m just noting if the Minister is noting this, hopefully—the calculations—

CHAIRPERSON (Barbara Kuriger): You carry on.

RACHEL BOYACK: Great, excellent—two working ears.

Hon Simon Watts: I can hear out of this ear, as well.

RACHEL BOYACK: I’m very pleased to hear it, Minister. My question is about the calculations on how many families may end up not applying as a result. So what it states in bullet point 41 of the regulatory impact statement on page 15 is that income testing the first year of Best Start will mean that families will have to apply via a separate Inland Revenue form, and, as such, fewer families may apply due to increased compliance costs in the application process, resulting in fewer families being identified as being eligible for other Working for Families tax credits.

So what I’m asking is whether there has been a thorough assessment, because it doesn’t then go into the detail of the impact of extra administration and burden being required on families to apply for Best Start and those that then might drop out, and then, as a result, end up not being able to access the benefit that they’re entitled to. I’d like to know if the Minister has looked at those calculations and has had advice on how many families may then drop out of that application process, and, furthermore, what would the impact be on child poverty, because, obviously, the Best Start payment is a policy that is designed to address child poverty.

That first year is designed to be universal so that more families can access it, so I’m concerned, on reading this regulatory impact statement, that fewer families may apply and, therefore, fewer families may get access to their entitlement, particularly in the first year of a child’s life. That means less nappies being purchased and less formula, if they’re not breastfeeding, and the like. So my specific question is: how many families will it be, has he had those actual calculations given to him, and what is the specific impact on child poverty?

Thank you very much, Madam Chair, and for those questions. To those tuning in at home—and I know there will be a lot of people watching the tax bill this morning because it’s such a good piece of legislation—I say good morning, and I hope you’re having a great day, wherever you are in the country.

Let’s answer the question—and it’s a technical question—in regards to the minimum family tax credit. Just to the member’s point there, that was adjusted to match increases in main benefits by inflation, and it was adjusted by Government in Budget 2024.

In regards to the amendment put forward by the Rt Hon Adrian Rurawhe, we will not be considering that amendment in the context of the point that has been noted.

In regards to the question by the Hon Ginny Andersen, pay equity is out of the scope of this bill. The scenario given was hypothetical and, therefore, is not something that one would be able to calculate, even if it was in scope.

Lastly, the question from Rachel Boyack in the context of whether there has been a thorough assessment in regards to this policy, the short answer is yes.

Thank you, Madam Chair. Thank you for the opportunity to take a first call on this bill. An important bill it is, and I look forward to the Minister of Revenue’s engagement on my first question about clause 7, which I hope will be a back and forth with the Minister. Minister, under clause 7(1), what number in 2023 did the National Party promise New Zealanders would be in—[Interruption]

I think we’re getting to the point on clause 7 where we’ve had several questions on clause 7. It’s the third time I’ve heard the question around the National Party, and the Minister has actually just answered that one. So do you have some other questions on the actual clauses in the bill?

Just a very quick question about what—

Sam Uffindell: Madam Chair.

CHAIRPERSON (Barbara Kuriger): Oh, was that a point of order?

Sam Uffindell: No, no, no, I thought—I didn’t see her. I apologise.

CHAIRPERSON (Barbara Kuriger): Oh, OK—sorry.

INGRID LEARY: What cross-agency work has been done regarding the Best Start payment. This is simply because the Ministry of Social Development (MSD) published a report last week that showed a clear corelation between school attendance and families that were receiving this payment. It is so strong, in fact, that they almost—if you read the wording of the report—say that it’s causal.

So, given that this Government has put money in this Budget for school attendance, what analysis did the Minister do or what conversations did he have with MSD officials to find out what the benefits would be to keep the payment in place, or, if there was going to be this change in threshold, what impact would that have on school attendance? Did he actually have those conversations, because it would seem really illogical to be putting money in another part of the Budget to boost that when the Government’s own advice shows a clear corelation between the Best Start payment and school attendance?

I am now getting into a little bit of repetition. But, as the member will be aware if she has read the regulatory impact statement, that cross-agency work has been undertaken in the context of all elements of this Budget, and the reporting, in the context of the way in which these policies interact, has been undertaken and will continue to be undertaken.

The Hon Dr Deborah Russell—new questions, please.

Yep, thank you, Madam Chair. I do have one last question on Best Start, and then the next set of clauses in Part 1 are to do with KiwiSaver. So I’m pretty ready to move on to the KiwiSaver discussion in Part 1 in just a moment because there are clauses there that do that. Just looking at Best Start, and it is a question—I’ve already asked about the interaction of the minimum family tax credit, and I think the Minister answered that it was adjusted in Budget 2024. As far as I can tell, that’s usually an annual adjustment, at times—so I guess it’ll turn up in a future tax bill, or in something like that.

However, having said that, we are taking Best Start away from a number of families and there is another interaction there, and that is with last year’s FamilyBoost, which came through in Budget 2024. I just want to understand if some work was done on the interaction between the FamilyBoost policy and this new policy taking Best Start away from however many families it takes it away from. I think it is 53,000 families—no, that can’t be right.

Ingrid Leary: 61,000.

Hon Dr DEBORAH RUSSELL: It’s 61,000 in total, with these abatement changes. That’s a lot of families who are now losing out, so I’d like to know if there was some interaction there.

However, having said all that, I do think it is time for us to move on to look at some of the KiwiSaver changes. Now, the KiwiSaver changes in Part 1 are in clauses—let me see—clause 9 through to clause 16, which are all to do with KiwiSaver. It’s quite a significant change to KiwiSaver, so I think we do need to talk about the policy here, as well. There are three significant changes that we need to talk about. The first is the extension of the KiwiSaver tax to—

CHAIRPERSON (Barbara Kuriger): Can I just ask a question here, on the KiwiSaver part? There’s a large chunk of KiwiSaver in Part 2, so if there’s something specific to Part 1, could you point to exactly where it is—

Hon Dr Deborah Russell: Oh, absolutely.

CHAIRPERSON (Barbara Kuriger): —because we’ll have the large part of the discussion on KiwiSaver in Part 2.

Hon Dr DEBORAH RUSSELL: Well, I disagree, Madam Chair. If we look at clause 13, that is exactly where the—

CHAIRPERSON (Barbara Kuriger): That’s what I’m asking it for—I just want the committee to be clear as to what’s in Part 1 and what’s in Part 2.

Hon Dr DEBORAH RUSSELL: In Part 1, we have the place where, in clause 13, it’s where the actual change to the tax credit sits. That’s the clause that does the actual work, and we actually need to look at that tax credit there. Clause 9 introduces the threshold—

CHAIRPERSON (Barbara Kuriger): That’s fine—I’m not disagreeing with the member. I know the member understands this very well, but I’m just making it clear for the committee—OK?

Hon Dr DEBORAH RUSSELL: Thank you. To be honest, it’s a bit hard getting up to speed with it just overnight, but we’re getting there—we’re getting there.

Arena Williams: You are means-testing retirements savings—justify that.

Hon Dr DEBORAH RUSSELL: Well, right—OK.

CHAIRPERSON (Barbara Kuriger): I think we’ll leave the member who is speaking to ask the questions, thank you. The Hon Dr Deborah Russell is speaking.

Hon Dr DEBORAH RUSSELL: Thank you, Madam Chair. So I do want to talk about the general policy, and there are three policy changes. One is extending KiwiSaver to 16- and 17-year-olds, so the tax credit part of it, and that’s sitting in clause 10. We need to talk about introducing an upper threshold for KiwiSaver, and that’s introducing the $180,000 threshold, which is sitting in clause 10(3), and the other one is the actual change in the tax credit, which is sitting in there.

I would like to talk to the Minister and ask, first, why—why? KiwiSaver has been an enormously successful policy. It has been enormously successful in getting people to save for their retirement. It has been enormously successful in helping people to build their retirement changes. It was introduced by Sir Michael Cullen, and it was a far-sighted policy. People are now engaging with saving, and so on. So why, then, turn around and knock some of the incentives for KiwiSaver? Why turn around and say that it’s important to have a threshold in there now? Why turn around and reduce the member tax credit now?

I tautoko the change to allow 16- and 17-year-olds to participate in KiwiSaver. That’s an excellent change and it gets people going early, so of course we agree with that change and we really support it. But we, nevertheless, look at the disincentives now, and I want to know from the Minister why, when we are all deeply concerned about retirement savings, would they introduce this sort of policy.

Thank you very much, Madam Chair. I’m not going to engage in a deep degree of policy, because Part 2 of this bill deals with KiwiSaver. But the aim of the changes made is primarily to ensure that KiwiSaver is more sustainable. The impact of the Government contribution on the overall retirement savings is likely to be small, and the change actually increases value for money.

I move—

Glen Bennett: Point of order, Madam Chairperson.

CHAIRPERSON (Barbara Kuriger): I’ve got a point of order coming from my left.

Glen Bennett: Kia ora, Madam Chair. I’m just seeing the excitement of the Government MPs, and looking at Speaker’s ruling 68/4, because we’re in urgency, I notice there are at least two members from the two other Opposition parties that have not spoken on this, so I just wanted to clarify.

CHAIRPERSON (Barbara Kuriger): Yeah, can I make the point that I’ve had a discussion with the Clerk about this, and I know that the Hon Dr Deborah Russell has asked some specific questions to Part 1, but most of the clauses on KiwiSaver are in Part 2. We’re not going to shut down the conversation on KiwiSaver, and if there’s something in Part 2 that the Hon Dr Deborah Russell refers to in Part 1 as a result of asking her questions in Part 2, then we can build on that. Tom—

Glen Bennett: Speaking to the point of order, I guess the clarification was from Speaker’s ruling 68/4 that there are still members who are seeking the call that haven’t actually had the opportunity to speak, so we don’t yet know what they’re going to talk about. That was my—

CHAIRPERSON (Barbara Kuriger): Yes, I do get that, but I am going to accept a call from Tom Rutherford because I do believe we’re going to get ourselves into a bind here. I fully believe we can answer the questions, and members are welcome to bring them up in Part 2.

TOM RUTHERFORD: I move, That debate on this question now close.

The question is that Arena Williams’ tabled amendment to clause 4, to delete new section CC 15, be agreed to.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 4, new section CC 15, to change 25 percent to 40 percent, be agreed to.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 4, new section CC 15(4), to insert “single”, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 5, to delete new section DI 1, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 5, to delete new section DI 2, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 5, to delete new section DI 3, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 5, to delete new section DI 4, be agreed to.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 5, to delete new section DI 4(a)(i), be agreed to.

The question is that Celia Wade-Brown’s tabled amendment to clause 5, new section DI 4(a)(iii), be agreed to.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 5, to delete new section DI 4(a)(vi), be agreed to.

The question is that the Hon Rachel Brooking’s tabled amendment to clause 5, to delete new section DI 4(a)(vi) and (viii), be agreed to.

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The question is that Dr Lawrence Xu-Nan’s tabled amendments to clause 7(1) and (2) be agreed to.

The question is that the Hon Dr Deborah Russell’s tabled amendment to clause 13(2)(b), to replace “$260.72” with “$500.00”, be agreed to.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 16(1) be agreed to.