Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill

Mr Chair, thank you. It’s a pleasure to be back talking about tax again. Now, as I recall—just a quick reminder—we were debating this last Wednesday. We got a little bit of a way through Part 2 of this bill on last Wednesday night. We spent just a very short time on it yesterday—just half an hour. We are going very systematically, clause by clause. And, in the latest discussion, I think, on last Wednesday night, Barbara Edmonds was discussing clause 16B. Yesterday afternoon, Megan Woods was discussing clause 20, and I was discussing clause 21.

Now, I do want to return to clause 21 because we had only just started on the debate on clause 21. If I just get my handy copy of the bill out, it turns out that in clause 21 we’re dealing with employee share schemes. These are the schemes—for those people who have only just tuned in—where a company can allocate shares to its employees. It’s a form of remuneration, but it’s also a form of ensuring that employees have a stake in the company. It contributes to, I suppose, employee motivation in some ways. It could do that. It’s particularly important in start-ups and the like. There’s a whole lot of reasons for using it, and I asked the Minister whether this was one of the measures for growth in this bill, and he said, “Yes, it was.” That was a handy thing to learn. I think I suggested that we would be wanting to know, in particular, whether the Minister of Revenue had quantified the impact on growth or whether there was any quantification of the expected positive impact on the economy. I’d hope that the Minister has had time overnight to, perhaps, get some information from his officials about that.

Moving on from that, I want to ask another question about clause 21. It’s a different question, and it’s looking at the actual amounts in clause 21. Now, it says that in section CW 26C(2) of the Income Tax Act, amended by clause 21(1), in paragraph (b), $5,000 is going to be replaced with $7,500, and, in paragraph (c), $2,000 is going to be replaced with $3,000. So there are two—well, there are four numbers floating through these changes, but they relate to two items. I would like the Minister to clarify a couple of things here. The first is what the two items there are. As far as I can see, one relates to maximum value, and one relates to maximum benefits. So I do want to understand how that gets picked apart and what the concepts are floating in behind that.

The other thing I want to understand there is, actually, why the increase from $5,000 to $7,500 and why the increase from $2,000 to $3,000. Now, if we look at those, they’re both a 50 percent increase—7,500 minus 5,000 is 2,500. That’s 50 percent more than the previous amount. And 3,000 minus 2,000 is a difference of 1,000—an increase of 50 percent. But the thing is that the explanation that was given is that this increase was taking account of inflation. Now, that seems odd, right? It just seems odd because, as we know, inflation doesn’t come out in nice round numbers. There must be some calculation in behind this as to what the appropriate amount was to lift the thresholds to, and if it is an adjustment for inflation, there must have been some sort of looking-back at what inflation was since this clause first went into place and, therefore, at what the amount was going to be. But I can guarantee that without even looking at what the inflation might have been over the period this was in place, it wasn’t going to be an exact 50 percent.

I’d like to understand just how that 50 percent increase was arrived at and its relationship to inflation. I’m going to guess, given the diligence of the officials at Inland Revenue, that it was not just a matter of someone sticking their finger in the air and that there is some relationship to the inflation change over time. But I would like to have a little bit of an explanation as to what that relationship is and how those particular figures—those nice, neat, tidy, round figures—were arrived at in order to ensure that we got that kind of outcome. So if the Minister could address that, that would be very helpful.

Before I take the next call, I forgot to say some of the magic words, so I will. Members, the House is in committee on the Taxation (Annual Rates for 2024—25, Emergency Response, and Remedial Measures) Bill. When we were last debating this bill, we were debating Part 2—for the benefit of those tuning in at home. Part 2 is the debate on clauses 4 to 115, “Amendments to Income Tax Act 2007”. The question again is that Part 2 stand part.

Thank you very much, Mr Chair. For all those sitting at home watching, we’re now 5½ hours into this committee stage of this bill, one which had a full select committee process, and they’re going clause by clause. But clause 21 has a question, so I’ll answer that. This Government is focused on economic growth. No surprise there. Employee share schemes support people that are doing business start-ups in the tech sector—that’s good for New Zealand; that’s good for that sector. We’re making it a little bit easier for them to do that. We’re increasing the threshold in which they get tax-free income. We’ve applied a process to get to that number and we have come up with the numbers which we’ve got, and which industry are heavily supportive of and anyone working in the tech sector are very supportive of. This is common-sense, practical policy and we’re very proud that it is part of this.

Thank you, Mr Chair. I will have a short contribution, and I am very pleased that the Minister of Revenue is answering the questions, as he noted, going through clause by clause.

Now, in the last session when we were debating this bill, my colleague the Hon Dr Megan Woods was asking some questions on emergency events. I’m going to jump forward to clause 30, which inserts new cross-heading “Emergency events” and new section DB 69, “Deduction for interruption expenditure due to emergency event”. As my colleague the Hon Doctor Megan Woods said in the last session, it’s good to have these provisions about emergency events. What I’m interested in—and I couldn’t find anything in the commentary, and there doesn’t appear to be any changes in the Amendment Paper 247 from the Government either—is how this clause works, how the mechanisms work around it. So a person is allowed a deduction for expenditure incurred while their income-earning activity is interrupted by an emergency event if they meet various criteria.

I’m really looking for the nexus here. If the person can’t earn an income because of the emergency, what expenditures will they be incurring linked to that income that they are now going to be allowed a deduction for? So I’m just wondering—it could be quite a circular, chicken before the egg type of argument—if there’s an explanation for that, or if it is in fact this chicken and egg situation. So are there different expenditures that can be deducted even though the person isn’t able to make any income because of this emergency event? Thank you.

Well, I’m not going to get into circular egg conversations, but what I can say in regards to this is that there’s a range of expenditures that individuals will incur as a result of dealing with emergency events. What we’ve been very simplistic about around this provision is to say that there’s a threshold in regards to the $5,000 that will be applying to those individuals. They’ll have the discretion to think about that. But these are emergency events. We can’t be dictating all the time in terms of exact—we’re giving a little bit of practicality on the reality of the challenges that individuals face in these very difficult circumstances, and we’re putting it in place so that we don’t need to go through a full legislative process every time one of these emergency events occur. That is ridiculous; it wastes so much time and we want to make sure that these benefit and we can move quickly to get the support to where it’s needed, and that’s to the people that are on the front line dealing with these natural events and that’s a major stress point for them and their communities.

Thank you, Mr Chairman, and I thank the Minister of Revenue for that contribution. I believe my colleague Dr Deborah Russell will come back to that—that that wasn’t addressing the questions around the clause that the Hon Rachel Brooking had put.

We’ve made clear in previous contributions that we think that, actually, it is sensible to make amendments to our taxation legislation to make sure that we are set up with a framework where we can have a more off-the-shelf set of solutions for taxation, in that regard. But my colleague the Hon Deborah Russell, in a subsequent contribution, will come back and remind the Minister exactly what questions were being asked. I think it is important that we scrutinise this, because it is such an important set of provisions around what our framework for having the tax system set up to provide that relief would be. I remind the Minister before I go on to the next clause that I’m going to talk to that I still have the drafting question that I put to him yesterday around whether or not the $5,000 is a cap—how that figure was reached, what was the thinking behind that, and why that is the number. That is in clause 20.

I am going to skip ahead a little bit, and we’ll probably come back to some of the other clauses in subsequent questions, and they are the clauses that are around the platform economy, which are in this part of the legislation, particularly clauses 14 and 23. So this is making sure that people who operate within the platform economy—e.g., Airbnb—pay GST. In some cases, those people get GST credits, that are treated as income, and that is what this part of the legislation is looking to address. So, ordinarily, GST is entirely backed out of the income tax system, so you don’t claim the GST received as income and you don’t claim GST paid as expenses. And that’s well covered in the commentary on this bill.

The question is: for clause 14, what is the flat-rate credit in section 2(1) of the Goods and Services Tax Act working off? And why are we mixing up income tax and goods and services tax? What is the thinking, and the policy thinking, that led to that being in the clauses of this bill? In clause 23, why are we changing section CX 1B—first of all, saying that the flat-rate credits are excluded income, per CX 1B, as it is now—and then after this bill is passed, saying they are not excluded income. Which is it and why is there this confusion? Is this something that we need to be looking at the Minister bringing some amendments on to clear up those ambiguities and those confusions that could arise? I would be interested to hear from the Minister, particularly in relation to clauses 4 and 14 and 23, around exactly why they are drafted as they are. So those are my questions for the Minister on these particular clauses; we’ll have more to come.

Point of order. Thank you, Mr Chair. There’s just something that the Minister of Revenue said, and I’d like you to clarify this for us because the Minister said that we’d spent 4½ hours on this debate, but my understanding is that in committee stages the issue is not so much the time that is spent on a debate but whether people were raising new points or not. So the fact that we might spend a lot of time moving through it doesn’t really matter; what actually matters is whether the points that are being raised are new points or not, and whether we’re engaging in repetition. Now, we’ve been very, very careful not to engage in repetition. We’ve actually worked this. So I just wondered if I could have some clarification from you on whether it’s time versus repetition.

Just speaking to the point of order. I actually didn’t say 4½; I said five hours and 15 minutes.

I will take some advice on this and continue to think on this. But we do need to have new material and to cut out repetitions. It’s also possible that the Minister might be giving some answers, and then some sequent questions could be brought up as well. But if those questions have already been answered in previous questions, then that could also count towards repetition. But I will take a bit more advice on that.

Speaking to the point of order. Thank you, Mr Chairman. I’m just seeking some clarification. I absolutely understand what you’re saying about whether there’s repetition in the questions and that in some of the subsequent questions there may be repetitions. But I’m just asking for some advice on what happens with questions that we are putting that are not being answered by the Minister, because there is a large and growing number of questions that are still outstanding that the Minister has not either addressed or answered.

I will come back to that.

Speaking to that, as well, just a further point in there. If the Minister has, in fact, answered incorrectly, I presume it’s still quite possible to come back and say, “Actually, mate, I get it, but you’ve got it wrong.”

I can acknowledge that there are going to be different perspectives in the committee. The Minister can address those questions as he feels appropriate. The point is that he addresses those questions. I will give you an update where we get with this. But we’ll continue.

Thank you, Mr Chair. I’ll just acknowledge what the Hon Dr Deborah Russell and also the Hon Megan Woods have also mentioned before that—this is quite a substantial bill. But I’m also seeing that the Government parties are very excited to take a call on this, particularly members of the Finance and Expenditure Committee, so I look forward to their contribution to this bill as well.

My question to the Minister of Revenue is around actually the Minister’s Amendment Paper, specifically the Amendment Paper 247. We’re looking at, since we’re still on roughly around clause 21—I’m actually looking at the new clause 21BA that’s being introduced, and just to note that, again, this Amendment Paper was introduced to the House post - select committee process and also post - second reading, so it’ll be really good for us to kind of get some understanding on some of the policy intent of this Amendment Paper as well.

So my question to the Minister, when he comes to the newly introduced clause 21BA, inserting new section CW 39B, is around the Auckland Future Fund. Now, granted that we have heard the bill coming through first reading and is currently sitting at select committee on the Auckland Future Fund, I’m curious as to know, because the Auckland Future Fund bill that’s been introduced is looking at the governance and management structure of that particular fund, why then this Amendment Paper introduces a fund where some of that governance and management structure hasn’t even been set in stone yet and is still currently going through select committee. So is that kind of a cart before the horse sort of scenario? I just want to kind of get a clarification from the Minister on that particular intent with the introduction here. Is it anticipating that that bill will go through the House with no issues?

I’m also curious in terms of the type of exemptions that are being done here, because, again, the Minister, being the Minister of Revenue but also an Auckland-based electoral MP, would have a vested interest in this. It says that the exempt income does not apply to things by a trustee of the Auckland Future Fund from a council-controlled organisation (CCO) or an organisation linked by ownership or control to Auckland Council, its port company, etc. So, if these are not included, what does then fall under subsection (1) as a certain amount from commercial undertakings? Are we looking at the exempted income being the fund itself as opposed to the other things that are associated to the fund? I just wanted to get some clarification on what the Minister means by commercial undertakings.

I think the last part around this is sort of in terms of as we’re looking at this, again, because this is a bill that’s still going through select committee, what sort of consultation has the Minister received or sort of advice has the Minister received around the nuance between that exempted income of the Auckland Future Fund? So those are my three questions. What is the relationship between the introduction of this Amendment Paper and the bill that’s currently going through select committee? What is considered an exempt income if CCOs and other sort of organisations linked by ownership or control of Auckland Council like port company, etc., is not part of the exempted income? And what consultation or advice has the Minister received regarding the need for having that exempted income in the first place?

Thank you very much, Mr Chair, and I thank the member for the questions. So in regards to the questions by the member in regards to new clause 21BA, inserted by Amendment Paper 247, on the Auckland Future Fund, he’s right to note that there is a bill currently working its way through the House. What we do know is that the Auckland Future Fund is part of Auckland Council, which is tax exempt. So common sense prevails that this entity will also have that same tax exemption, hence why we’re putting it through this bill to make sure that when it’s operational then it can get on and do what it needs to do. The member asked about consultation. We did a lot of consultation with Auckland Council and that would be expected in that regard.

Clause 20 was a question as well, raised by a member previously around whether it was a cap or not. Yes, it is a cap. I said that when I raised it. I actually said that twice when I got asked the same question in prior sessions on the same point. But, again, it is a cap of $5,000, and that is that.

Also, a question in regards to clauses 14, 23, and 29 by Hon Dr Megan Woods in regards to flat-rate credits and the platform economy. What we’re doing here is actually a number of changes to ensure that the treatment in regards to these aspects of income—there’s a number of complexities and we’re moving and making improvements to that, to make complying with the income tax obligations more straightforward. What that means for those watching at home is we’re removing unnecessary bureaucracy and compliance to make the costs on taxpayers less. And, by the way, that’s a good thing and that’s very much cognitive and representative of this Government.

Before I take the next call, I just want to address the point of order that came up earlier. I’d like to direct members to Speakers’ rulings 68/1 and 68/2. Speaker’s ruling 68/1 states, “Closure motions are more likely to be accepted in a shorter time period if Ministers have engaged in a positive manner to non-political technical questions.”, and Speaker’s ruling 68/2 states, “The acceptance of a closure motion is about the content of the part, the content of the speeches, and the way that the committee conducts itself.”

So it’s engagement by the Minister on the one hand, and the conduct of the committee on the other, and the judge of relevancy is myself.

I move, That debate on this question now close.

I’m pretty relieved to have gotten this call—thank you, Mr Chair—because, with all due respect to the Minister of Revenue, frankly, he was wrong in an explanation he gave before. I appreciate tax law is complicated. There’s a lot to get through and a lot to understand, but I also understand that the Minister, in his previous life, like me, was an accountant, so I do expect that he has a better understanding than most laypeople of tax law.

I want to go back to the discussion that my colleague Rachel Brooking raised. She asked the Minister to direct his attention to clause 30 of the bill, and it is to do with allowing a deduction for expenses incurred during an emergency event. Rachel Brooking wanted to know about allowing this deduction for expenses when no income is being earned. Now, the Minister replied, and he replied talking about the new emergency provisions in general, and why we were having them in place. He said, “That’s why we have this clause 30.” But, actually, that’s kind of a very big, broad, and general answer to what was a very specific question. The very specific question was this: it was to do with the nexus with income.

Now, as people who are familiar with the Income Tax Act know, Part D of the Income Tax Act concerns itself with expenses that people may deduct from their income. Section DA1 gives a general permission, and the general permission is that when you incur expenses, you may deduct them. All right, but you’ve got to earn income. In order to deduct an expense, it has to be incurred either in the conduct of a business or because it’s an earning income. And there’s a problem: if your business has been interrupted by an emergency event, you’re not earning income, right? That’s the point of a business interruption—you can no longer earn income. So, if you’re no longer earning income, you can’t deduct expenses. You’ve got to have that nexus with income, and those are the actual words in the Income Tax Act.

The interesting thing was that I spent quite a bit of time with the bill commentary—I spent quite a bit of time working through this—and I couldn’t find a discussion of this particular clause in the bill commentary; and yet it’s introducing something quite normal and interesting, that in these emergency events, even though you are not earning income, you can get deductions for expenditure. So you can see why I’m quite concerned. I’m concerned on two grounds: one is that the Minister—and fair enough; the tax bills are long and complicated—didn’t quite get the right spot of the question. But the other one is that it is quite novel, really, to be able to claim expenditure when there’s no income. I get why we would do this, I get why it’s important, but it gets even more important than that—the fact that the nexus with income puts a bit of a limit on the sort of expenses that can be claimed.

What I want to know from the Minister is whether—I can see, I think, why that nexus needs to be set aside, but I’d like the Minister’s explanation on that. I also want to know whether there’s going to be a limit to the kind of expenses that can be claimed in this space. Perhaps, you know, if there’s no nexus with income, what other expenses might a person claim just because they can? The nexus with income imposes a kind of control over it. There is a limit to what can be claimed. But, as soon as we do away with the nexus with income, fair enough in this circumstance, we also do away with that limit. So what limit is going to be placed on the types of expenses that can be claimed in this context?

I’m trusting that the Minister has got the point of the question now, and I know he will understand it, because I appreciate it that, when you hear it the first time, perhaps you don’t quite get the question that’s being asked. I’m sure the Minister has got the point of that question now, and I’m looking forward to hearing his answer.

Thank you very much, Chair, and I thank the member for the question. I do also acknowledge that this point was discussed during the select committee phase and I know that the member was part of that. But irrespective of that, we’ll cover off the detail for the purpose of those watching at home. It is important to note that this new section DB 69 inserted by clause 30, in regards to deduction, supplements the general provision which the member has noted. The purpose of this new section is to prove that there is a nexus between the income and expenditure, acknowledging that that would have been disrupted by the event.

There’s a point going further in terms of how far does that deduction go: well, the deduction has to be relevant to the income-earning activity of the specific example, and so within that, that provides the bounds of what is reasonable or not. Obviously, the IRD are very accustomed in terms of dealing with that. But it is important to note that in an emergency event, what would normally be the case in terms of that nexus in effect can be broken and the outcome of that would be detrimental; hence what the Finance and Expenditure Committee have done through their consideration of this bill. This new section reflects that and ensures that there is a nexus between income and expenditure.

Thank you, Mr Chair. I want to ask about clauses 31 and 32, which are about the transparency rule for partnerships. So my understanding is we’re moving from a situation where we’ve had transparency to one where we’re looking at an assumption of opaque partnerships. That’s with regard to the payment of pensions to former partners and the payment of working partners in various other areas. I have looked at the commentary, but it doesn’t really tell me why. My understanding is that’s not the usual rule; we’re moving away here from the Income Tax Act. So I’d like to know: what’s the justification for doing that? What’s the advantage of doing it? And specifically, perhaps with regard to some of the clauses that we have looked at here—the sections are listed in the commentary for the benefit of it. But what is it that it’s achieving in those sections? I appreciate you’re unlikely to want to look at all of them, but can you give me an example of where that is doing a good thing?

I appreciate that I’m not on the Finance and Expenditure Committee any more; I’m not an accountant, but I think it’s really important that people out there understand a change like this in ordinary terms.

CHAIRPERSON (Teanau Tuiono): Can you tell us which clauses you’re talking about?

I’m talking, sir, about clauses 31 and 32. And if you look at the Inland Revenue’s commentary, you can see on page 141 there’s just a sentence on it and it actually provides all the sections that it affects. So there are a whole range of them.

💬 Hon Dr Deborah Russell: It’s 31 and 32.

Yeah, it’s clauses 31 and 32, and then the sections that it proposes to affect are listed. Thank you very much. I’d be very grateful for an answer.

Thank you, Mr Chairman. I have some further questions for the Minister of Revenue around clause 30, the “Deduction for … expenditure due to emergency event”. This is something, despite the discussion at the Finance and Expenditure Committee and some of the discussions that occurred in this House, that I am still unsure whether it will be covered. It’s not a theoretical situation. One of the things that the bill makes clear is that it’s drawing on what some of the responses to the Canterbury earthquake sequences were and on the tax relief that was put in place there. So I’d be interested to hear from the Minister about his understanding of a business that was operating out of a building that was not red stickered or was not damaged or deemed to be uninhabitable, and that, none the less, had its business interrupted, not because of its own building but because there was a demolition of buildings that had been red stickered or deemed uninhabitable very close by and because the entry and pathway to the building was blocked off in order to facilitate the demolition of other buildings in close proximity.

We had the real question, through the Canterbury earthquake sequence, of whether or not interruption insurance would apply under these circumstances. So have we fixed that in terms of the tax situation and in terms of the new definitions? I know it’s certainly the intent of the Government, and the intent of this legislation, to really bring all these things together and tidy things up, but I’m still unclear. I think it’s quite clear, if there was a building that was red stickered or deemed uninhabitable, what the situation would be there. But I want to know what it is when there’s a building that is, essentially, collateral damage from the fate of a building that is in close proximity, and whether or not it is the Minister’s understanding that the definitions that we have in this legislation, particularly around clause 30, are broad enough to do that.

Thank you, Mr Chair. I just want to ask some questions of the Minister of Revenue relating to a separate clause in Part 2, which is clause 29. I do want to acknowledge that the Minister has been really helpful in terms of answering questions. This one is a wee bit complicated and so I’d really appreciate it if he was able to help me understand.

Clause 29 amends section DB 2, related to GST. It replaces “listed services” with a new provision that says, “listed services. However, this subsection does not apply if the underlying supplier has received a flat-rate credit, as defined in section 2(1) of that Act, in an income year and has chosen as described in section CH 5B (Adjustments for certain flat-rate credits under platform economy rules) to include the amount of the credit in their income for the income year.”

It makes my head want to explode, and I just want to note that our tax expert Deborah Russell may have some more questions on the specific clause because she is the expert amongst our team—I’m not going to claim to be that person. But my understanding of this particular clause is that it relates to platform economy rules, which means you can get a deduction for expenses. But what this would mean, according to the commentary on the bill—Inland Revenue’s commentary, dated August 2024; just to help the Minister, and I realise I’m referring to lots of different parts of the bill and the commentary—is that you can’t, as I understand it, get a deduction for GST, but if you’re not GST registered, then you can get a deduction. But then the deduction is removed for people who are using the platform economy rule. But what this amendment does is it puts it back in again in some circumstances.

So I’d like to know what those circumstances are and why. This feels really complicated—to basically not be registered and then you get the deduction, then the deduction’s removed, then you put it back in again. I think this is quite a complex matter. It is making my head explode. It is messy, and I’d be really appreciative if the Minister could help untangle this wee mess. I’m sure that if I haven’t quite got my interpretation of my reading of this correct, my colleague Deborah Russell will at some point be able to further flesh out the questions that the Opposition has about this. But, in the meantime, I’d be really interested in hearing from the Minister.

Thanks very much to the members for those questions. I’ll work my way through them, starting with the Hon Dr Megan Woods’ point around clause 30 inserting new section DB 69. As I heard it, I think the question was: is the definition broad enough to cover an interruption? The example of Christchurch was used in that example. There is no limit in terms of the amount of the deduction that can be are taken in, in regards to the emergency event, and the emergency event is defined at which—I can’t speak for the specific—the Christchurch earthquake would seem like a threshold of that. But the deduction is not limited only to the extent that it is relevant to the income production or income purposes of that business operation. And that would be where the constraint of the deduction would be placed through. So I am comfortable the definition is broad enough in that context.

There were other questions raised in regards to clauses 31 and 32 by the Hon Dr Deborah Russell, in regards to partnerships. In effect, this is a remedial—

💬 Hon Dr Deborah Russell: It was Helen White.

Helen White—apologies to the member Helen White. But I do know that this was in regards to partnerships. This is primarily a remedial change. The purpose of these changes—going to the question of why we are doing it—is to clarify that in certain circumstances, a limited partnership should be treated as an entity. That ensures that the other sections of the bill work as intended. So that’s the purpose of that remedial change, and it is making sure that the context in terms of the way in which those entities are treated is transparent in the context of which they need to know.

Just before I take the next call, I have gone back through the tracking sheet and last night people did talk about clause 30. So just to note that if we are focusing on questions around clause 30, that has been covered quite a lot. So I’m looking for brand new fresh material in that regard, without repetition.

Thank you, Mr Chair. It’s good to be able to take a call on this and to ask some questions specifically around—not clause 30, you’ll be pleased to know—clauses 14, 23, and 29. Now, this really comes from a question both around speed and also around the ability for tax law and tax legislation to keep pace with the speed at which the tech sector and platforms move, because we know that platform developments, platform shifts and changes, often happen at incredible speeds. We can wake up in New Zealand and, overnight—it hasn’t been night-time somewhere else in the world—a platform can have changed ownership or changed function. That can have quite serious impacts on how we capture the revenue spent or invested into, or generated, even, on that platform.

So in the summary here of the proposed amendments, it says that it would provide certain underlying suppliers who make supplies of listed services through an electronic market place the option to include the flat-rate credit as assessable income in their tax returns. It goes on to say that this would allow them to deduct their expenditure for income tax purposes on a GST-inclusive basis without the need for apportionment.

To come back to the point of the speed of platforms, in the previous experience that I’ve had of creating content for an audience—and I’m using that as an analogy for capturing or measuring correct apportionments of taxes on platforms—it is that you do have to move incredibly quickly to adapt and keep up with those audiences. Digital market places are exactly the same.

So the questions, really, are: what steps are in place to ensure that the tax and tax capture keeps up and it’s not left behind but also that it doesn’t get ahead of the movement and actions of those platforms? That really comes down to the identification of those certain underlying suppliers, who and how often are those assessed and updated, and at whose discretion is that work taking place. How can the Minister of Revenue be confident that the speed at which tax regulation, tax law, works is going to keep pace not just over the next six months and the next 12 months but, really, over the next five- or 10-year horizon, when we can expect to see huge advancements in the way that these platforms operate and the speeds at which they operate—particularly in the context of artificial intelligence and all of the opportunities and advances that that operates to this platform sector?

So it’s really, I guess, a question around a David and Goliath battle. Even though, currently, the Goliath is the tax document sitting in front of me, really what we’re looking at in the platform context is that the Goliath becomes the ability of these platforms and the larger companies behind them to move at extreme speeds that, potentially, can always stay just ahead of taxation and taxation’s ability to capture. So their constant evolution and shift presents a real challenge for legislation and for the Minister. So I’m really interested to hear your answers, Minister, to these questions specifically around the ability to keep pace with the speed at which technological advancements across platforms will continue to evolve not just around the world but specifically here in New Zealand, which, obviously, this legislation is relevant to. Thank you.

Thank you very much, Mr Chair. The question relates to clauses 14, 23, and 29, consistent with a question answered more, but I’ll provide a little bit more context for the member’s purpose. First and foremost, this is an optional area for a taxpayer. It is primarily looking at hosts, drivers, and deliverers, and this is a result of the platform economy GST rules that came into force on 1 April 2024.

It basically provides the mechanism for those individuals to treat their flat-rate credit that they get from an online market place as assessable income instead of excluded income. And because they can choose it to be assessable income, that means that they can then deduct GST. And so as a result of that, the quid pro quo of being able to treat assessable income and therefore being able to claim GST means that complying with their tax obligations, as I noted before, is made more straightforward. So that’s the purpose of that. The Finance and Expenditure Committee did consider this. They didn’t make any recommended changes to this clause; they thought it was about right and I’ll leave it with that.

I’m actually very, very grateful to get the call on this because I want to move on to clause 35. There’s a particular reason why I wanted to be the one to ask the questions around this. It’s to do with livestock valuation. My dad, in a retirement village, watches Parliament, and my dad happened to be a primary sector tax expert, and he knows the livestock valuation rules inside out. So I’m just going to say, “Dad, I’m asking this question for you.”

💬 Dan Bidois: Is he a National voter?

He supports Labour, just for the record. Now, it’s all about livestock valuation. Those rules are complicated because some livestock is held as a herd, as a capital asset, and some livestock is held as a trading asset, right? So buying and selling. The buying and selling of livestock might be growing a crop of lambs each year—

💬 Jenny Marcroft: A crop?

A “crop” will do. In about July or August, we’ll see them starting to look nice and fat in time for Christmas. So that’s, obviously, that trading, buying and selling—well, breeding, buying, and selling. But, of course, the flock of ewes which have the lambs in the first place are the capital asset. So there are some quite complicated rules around livestock valuation, and the clever accountants—like my dad, of course—know how to apply them and get those sorts of rules correct.

So this is an interesting little amendment to section EC 1, because what it does is it takes out a little bit of the rules. Now, the idea in EC 1 is that it’s all about livestock valuation. But, as it stands, in the way the EC 1 is written at the moment—EC 1(1), sorry—in the Income Tax Act, it implies, just the way it’s written, that if a farmer holds livestock for purposes other than purchase and sale, then it’s not covered by the livestock valuation rules. Now, it’s only an implication, just the way it’s written, but it’s quite an interesting one. The change is, actually, to clarify those rules. It takes out a set of words, and it says, if “a person … owns or carries on a farming business, other than a livestock … business, holds livestock for the purposes of farming that livestock in the ordinary course of carrying on the farming business:” So that’s the new wording.

The old wording implied that a farmer had to hold livestock for the purpose of farming. There was a dealing implication in it. So that’s a bit of a change of the language here. It’s only, I guess, remedial. It’s only a small change. But it would be interesting to know if there was any harm actually being caused by the previous version of the words. So this is a tidy up of the language. We’re spending the committee’s time on it, we’ve spent select committee time on it, and officials have spent time in the Inland Revenue (IR) policy unit working on this. Presumably, IR staffers out in the field have been dealing with farmers on this. But what I want to know is whether there were any actual tax cases—whether they were any pretty low-level tax case or whether there was any actual harm being caused. So what justifies the committee spending time on this particular matter if no harm was being caused by it in the first place?

Now, I get why we do want to try to tidy up the tax law. We do want the words to be precise because, in tax law, words really, really, really do matter. But I guess, just the step-on from that: was there actually any harm being caused by the previous standing of the words? My feeling is that those words have been in there for quite a long time, because it refers to subsection (2), the new stuff that’s coming in. It applies to the 2008-9 income years. That’s quite a long time back, so it implies that the slightly vague wording has been in there since the 2008-9 year. So, obviously, we’ve gotten by for about 15 years with having these slightly inaccurate words in there. So what’s been happening in those 15 years and why does it justify us spending our time and energy, right now, trying to update this clause?

Thank you very much, Mr Chair. I acknowledge and appreciate that the Finance and Expenditure Committee didn’t horse around in regards to this clause.

💬 Jenny Marcroft: Neigh!

They did consider it very seriously.

💬 Hon Chris Penk: The neighs have it!

CHAIRPERSON (Teanau Tuiono): Well done.

Well done. Ha, ha! As the member has highlighted, this is a remedial matter. The definition as it stands excludes livestock held for any other income-generating purpose. As a Government that is listening to taxpayers, particularly those in the primary sector, they’ve said to us that the inaccurate wording can cause confusion and potentially could result in some businesses valuing their livestock incorrectly or simply not valuing them at all. Hence it was prudent by Government to correct this through this remedial change. As a result, that will ensure that we don’t have an inaccurate assessment of income related to livestock on farms in New Zealand.

If I can carry forward that analogy, I would appreciate if members galloped to fresher fields and if we had no repetition and relevancy, the committee would appreciate that.

For many members, there is the appetite to move on to the crux of this particular part around emergency management. But before we get there, I just have one last question around an upcoming section, which is clause 35B, around valuation of excepted financial arrangements.

Just checking—and I also understand the Minister in the chair is also the Minister for Climate Change—I do have a question around this particular section around the forest land emissions unit transfer, just to get some clarity around this. My understanding, when it comes to this particular section, or even the preceding section ED 1(7B)(a) is around other parts of the Climate Change Response Amendment Act. But I think in this particular case, one of the things I was interested in is what is considered under section 64 of the Climate Change Response Act, because we know that section ED 1(7B)(a) is empowered by Part 4, Subpart 2, of the Climate Change Response Act 2002. But with this particular section, in terms of the no-payment of a price and also the accepted financial arrangement, how is the forest land emissions unit actually going to work in tangent to that, and whether the Minister knows of any other instance, other than forest land emissions units, where other types of unit may not be included as part of this? Again, section 64 of the Act gives the opening for other types of potential unit.

So I guess my two main questions are: one, how would this work in tangent to ED 1(7B)(a); and two, have there been other forms of emissions unit other than the forest land unit that will be considered as part of the accepted financial arrangement?

I move, That debate on this question now close.

Thank you, Mr Chair. There are still substantial portions of the emergency management bits that have yet to be traversed, so I think we’ll start exploring that now.

I wanted to ask the question, though—you know, this is the Taxation (Annual Rates for 2024—25, Emergency Response, and Remedial Measures) Bill, so I’m looking at the regulatory impact statement, “Generic response to emergency events”. Now, the officials proposed five different options in that regulatory impact statement. Option one is the status quo. That’s self-explanatory; it’s what we’re doing now. Option two is the step-down approach, which they say would use tax measures as the basis for the generic measures. Option three is the step-down approach with information sharing, similar to the second one, except with information sharing. Option four is extended information-sharing to other emergencies. Option five is emergency—definition of “emergency” when depreciation income arises as a result of the emergency.

So my question to the Minister of Revenue is: which of these options was the one that was implemented in this legislation—noting that the preferred option of the officials was option three. Was that the option that was used or was it some hybrid mixture of the other options? Just curious on what option ended up being preferred, because I’ve tried to read through this legislation. It’s very long, it’s very complex, so I don’t necessarily understand which option we ended up going with. So I’m keen for an explanation from the Minister.

I now turn to new clause 53B, inserting new section FP 3, I believe. That one has a section around definitions of various things. My question is related to the definition of the “emergency event period”, particularly in paragraph (b)(i)—so that’s new clause 53B, inserting the new Subpart FP, new section FP3, the definition section, under paragraph (b)(i), which is “the last day of the income year that is 5 income years after the income year referred to in paragraph (a);”. Now, I am just curious why—with five income years, is that the sort of standard thing in the legislation? Has that been defined somewhere else? Like, I’m curious why it’s five income years. That seems like a long time, but it could be a short time. I don’t really have much in the way of context and am curious to know from the Minister why exactly five years was picked for that period.

Another question that I had when going through this legislation—again, noting that unlike my colleagues I’m not a tax lawyer. I struggled to process and understand a lot of this, so I’m asking a lot of definitional questions. New section FP 14 is “When property uneconomic to repair”. I just want the Minister to, I guess, define that in layman’s terms. What does “uneconomic to repair” actually mean? It goes on to say it applies “when … (c) the person reasonably assesses that the item is uneconomic to repair;”. Are there other judgments or thresholds that go into that, or is it purely, you know, up to the whim of the individual to decide when things are uneconomic to appear?

I’ll just reiterate my questions because I’ve kind of traversed a lot of ground. My first question to the Minister was: which option is the one that’s being implemented in this legislation? Is it option one? Is it option two, option three, option four, option five, or some kind of new bespoke option? And my second question was around new clause 53B inserting new section FP 3, which is around the concept of five years—why five years? Is it independent legislation? I’m curious to see. And my final question was around new section FP 14—looking for, I guess, a layperson’s definition of uneconomic to repair. Thank you.

Thank you very much to the member Francisco Hernandez for those questions. In regards to the option that we selected, we went for option 3, which is a step-down approach. There’s a table in the back that outlines the five different options that were considered.

In regards to clause 53B, in terms of the five-year term, five years is a standard and pragmatic period of time, which is generally utilised for circumstances such as this.

The question in regards to clause 35B—the value of forestry land emissions—the context here is that the legislation as it stands correctly specifies the value of the units at the end of the income year; however, the acquisition value of these emission units is not stated in the legislation. Hence, it’s a technical oversight in the legislation, and we’ve made a fix to that, which makes sure that that is the case.

The other question that the member asked in regards to the other aspects of the Climate Change Response Act: obviously, that’s not in the scope of this bill. We just looked at this specific fix, in regards to forestry.

Thank you, Mr Chair. I am going to really gallop forward, but I note that colleagues have some questions further back in the bill. But mine is around subclauses 105(14) and (18). These are the provisions that relate to energy consumer trust exclusions. The proposed amendment would ensure that trusts that no longer hold shares in electricity distribution companies but continue to have the same class of beneficiaries for which the trust was established, also qualify as energy consumer trusts. And trusts that meet the current definition would not be affected by the amendment that’s before us.

So the background, in terms of the bill commentary—and I have looked at the bill commentary, but what I’m interested to understand some more from the Minister of Revenue is around the “why” for this, what the purpose of this is, and the number of entities that we’re talking about that would be affected by this amendment in clause 105(18).

By way of explanation, where I’m still not entirely sure and it’s not clear to me—and it may just be me, I’m not a tax expert—is why this change is being made. Lines trusts or energy consumer trusts that hold shares in electricity distribution companies, going through the definition—I won’t bother reading the whole thing out—energy consumer trusts “are excluded from the 39 percent trustee tax rate … and are [instead] subject to the 33 percent tax rate” on their taxable income. This is because they face an increased risk of over-taxation.

So, really, what is the policy push behind this amendment that we’re seeing in this clause? What is it that we’re trying to rectify? But, more importantly, how many of these entities are there? How big and how broad is the scope in terms of the impact of what this amendment will be?

So the proposed amendment to the lines trust definition in section YA 1 would ensure that it includes the trust that previously held the specified shares and continues to have the same class of beneficiaries. So, really just looking for some more detail from the Minister on that clause.

Mr Chair, thank you for the call. I’m grateful to my colleagues for having opened up the debate on what I actually think is perhaps one of the most significant parts of this bill, and we can tell that because it’s the Taxation (Annual Rates for 2024—25, Emergency Response, and Remedial Measures) Bill.

This new Subpart FP is very, very new tax law.

CHAIRPERSON (Teanau Tuiono): Which section are you talking about?

It’s Subpart FP—oh, I’m sorry, it’s clause 53b. Clause 53B inserts new Subpart FP, and Subpart FP has got, I think—how many new sections of tax law? It’s got something like 27 new sections of tax law. It goes from section FP 1 to section FP 27 in this copy of the bill. It’s 20 pages of new tax law, so we do need to have a really serious look at this. It’s not just remedial. It’s not just tidying up. It’s not just fixing a small matter. It’s introducing a very significant new part of the income tax law. So we do want to work through it quite carefully; there are some issues I do want to go through. I’m grateful to my colleague Mr Hernandez for opening up the discussion on this, and there were some pretty good questions about some of the matters in the bill.

I want to go to a slightly more general discussion first. Look, the reason is, if we look at new section FP 1 in the bill, it itself sits there with an outline of the part. So it introduces this new subpart of the Act, and the very first new section, FP 1, starts with an outline of what the subpart does. So it invites, right from the start, questions about the general policy around this—why we’re doing it; how it sets up the particular rules, the sorts of rules that are sitting in there or are not sitting in there. So that’s actually quite an important and distinctive thing to be doing. Having said all that, here we’ve got Subpart FP; it’s “Tax relief for emergencies”, and we’ve got the outline of the subpart.

Now, as we all know, in the last few years there have been quite a number of black swan events—events which created real trouble in New Zealand. From COVID-19 to earthquakes—the Kaikōura earthquakes. Something that I know there will be dear to the Hon Chris Penk’s heart—not dear; it was pretty sad, wasn’t it, Mr Penk?—the Auckland Anniversary floods, followed by Cyclone Gabrielle. So there were some black swan events, and of course businesses were affected every time. And every time, the Minister of Finance and the Minister of Revenue—then Labour Ministers—rolled out some emergency measures for businesses. Eventually, in terms of those emergency measures, people started saying, “Hey, we actually just need an off the shelf set of measures that can be rolled out as needed pretty quickly so they don’t have to be legislated every time.” It’s a set of measures that can be triggered by the Minister, or by the Governor-General actually.

There are some big policy questions that we need to answer. So I have some questions that I would like to understand from the Minister of Revenue. First of all—I do pretty much understand the justification of this, but how many times have these particular rules, these rules which are now codified into a set of rules, been tested in practice? The Minister has chosen particular rules to go into this suite of rules that can be rolled out as needed, but it implies that they have been used before, so it’d be good to get some feedback from the Minister as to how often have they been used and how effective they have been in providing the sort of relief that businesses actually need during times of emergency. So that’s one of the really big questions to answer around this.

The second thing is: I know I said that people were approaching us—and of course they were approaching us as the Government—it’d be good to know from the Minister whether the same people also approached him once he became the Minister of Revenue and stressed that these rules were important. And I think they are important. I think there’s bipartisan agreement on these rules. But it’d be good to know which types of organisation, which types of people actually came to the Minister and said, “Please get this off the shelf set of rules available.” So if I could have some response on that.

I suppose there’s a further set of questions around that. There are a number of rules sitting in this. So if we look at it, there’s a rollover relief for particular property, there’s relief for when income earning activities are interrupted—

The member’s time has expired.

I move, That debate on this question now close.

There are rules around—

CHAIRPERSON (Teanau Tuiono): Can I just ask you to get to the questions?

OK—the timing of depreciable property for employment-related relief; there are spreading rules for when livestock is destroyed. What I want to know from the Minister of Revenue is how he chose which rules were going to go into this particular piece of this brand new subpart of the Act.

So three questions are there for the Minister and I think they are all quite important questions: one is how often have rules like these been deployed and what effect did they give to the—how much did they help the businesses? Two, the people who approached us, were they the same people that approached the Minister? Who were the people who were asking for these rules to be implemented? And the third one is why this particular set of rules? So some have been included, but there might have been other emergency relief measures that were deployed from time to time. Why weren’t they in these rules? So why this particular set of rules?

Thank you, Mr Chair, and I thank members for their questions. I’ll work my way through those. One of the questions related to Subpart FP. I think it’s important to recognise that this is not new tax law. It’s actually a combination of measures used in past events, and those past events include the Canterbury earthquake, the Kaikōura earthquake, and the North Island flooding events. There were number of those and we’ve put them all together in that section of Subpart FP. So it’s not new.

The other question was in regards to clause 105(18) and (40), in regards to energy consumer trusts. Basically, the question was how many. We’re actually aware that there is one trust that did not qualify due to historical restructuring, but should have. Basically, what this clause is doing is ensuring that trusts that are substantially energy consumer trusts receive the correct tax treatment. So, again, you’d expect that that would be pretty common sense.

There have been a number of questions around how often these tax rules are used. While I do know quite a lot of things, I can’t know every time a tax rule is used by any taxpayer in New Zealand, and I think it’s a reasonable question, but I simply can’t answer that aspect.

The other question was why we chose these rules. The Inland Revenue maintain a list of remedial items which have been identified by taxpayers over many years, including tax experts. There are about 700 or so items on that list, and one of the things I did when I became the Minister of Revenue was to say, “Review that list. Identify the aspects that will genuinely create value, remove taxpayer compliance costs on taxpayers, and let’s make sure that we implement those changes to streamline the Tax Act and make life easier for taxpayers. So that’s the process that we go through, and a wide range of people feed into that process.

Before I take the next call, if I could ask members in the committee to be clearer with their questions. I appreciate the context because tax law is complicated, but having those clear questions will help the Minister to engage, and Speakers’ rulings do guide us towards engagement.

Thank you, Mr Chair. I had a couple more questions going through this legislation. My questions are around clause 53B, new Subparts FP 20, FP 21, and also FP 23. So I’ll just go through them. FP 20, my question is around—and look, as I think a lot of people involved in this debate are not tax lawyers, so I will repeat that I’m not a tax lawyer. My question on FP 20(c), “the period of 8 weeks starting on the date the emergency event begins”. Now, I just wanted to clarify my understanding of that. Does that mean that if an emergency event goes on for longer than eight weeks, the section doesn’t apply? Or is it just the eight-week period that does apply, or just the event going over eight weeks invalidates the whole period? So that’s my first question around that.

My second question around new Subpart FP 20 is: is the eight-week period—oh, well, I’ve answered my own question by reading it. It’s the one that’s already been defined by legislation. So I’ll move on to new Subpart FP 21. My question is around FP 21(2), and that’s the section which starts by saying, “Benefits satisfying subsection (1) that would, in the absence of this section, be fringe benefits”. So my question is: why has that threshold been chosen—the $5,000 threshold? Is that the one that’s already in the parent legislation, or is that the one that the Minister of Revenue has had advice on that that’s the appropriate measure? I’m just curious. I’ve never engaged with the fringe benefit tax system in any way, so curious for an answer for why it’s specifically $5,000 that’s been chosen as the threshold.

My third question is around new Subpart FP 23: “Livestock destroyed because of emergency events”. Now, my question is new Subpart FP 23(1)(c) around the issue of mixed-age female breeding animals that the person expects to have had at the end of the income year. Why is it 75 percent—the threshold that has been chosen? I mean I’m not an agriculture person either, so I’m curious why it’s 75 percent. Is that what the standard should be for if you’re trying to breed mixed-age animals? Is that the minimum ratio of female animals you need to have?

So just reiterating my questions. The first was new Subpart FP 20, which was around the eight weeks. The first question was what are the implications of going over the eight-week period? Does that mean that the relief might be invalidated or does it just go up to the eight weeks? The second question around new Subpart FP 21 was why was $5,000 the one that was chosen? And my last question was around new Subpart FP 23 around livestock destruction and the question of mixed-age female breeding animals—why was it 75 percent? Thank you.

Thank you very much, Mr Chair. The $5,000 threshold was the amount that the Finance and Expenditure Committee and also officials thought was the appropriate number for that circumstance. The eight-week question is in regards to new section FP 20, and, obviously, my response there was for FP 21(2). Eight weeks is a cap. It can go beyond that, but the eight weeks is a period of exempt income.

I’m not necessarily sure on the question in regards to the gender issues between bulls and cows.

I move, That debate on this question now close.

There is a really important question which is going begging in this, and that is: what is the definition of an emergency event? Obviously, we need to know what an emergency event is. Typically, in terms of getting a definition of a term, it’s Part Y of the Act, but often, in subparts, the subpart of an Act will have its own definitions within it. So new section FP 3, inserted by clause 53B, has got a series of definitions: affected class, affected depreciable property, and so on. It doesn’t have a definition of an emergency event in there.

I went to Part Y of the Act and looked for it there, and it’s not in Part Y of the Act. But the curious thing is that if we look at FP 1—in fact, lots of the new sections—it has a little line beneath it. I’m just going to take people—and I really do want people to look at this—to FP 1(3). It says, “Section FP 3 contains the definitions relevant for the subpart.”, and then, immediately underneath it, there’s a line that says, “Defined in this Act: affected property, depreciable property, emergency event, exempt income, fringe benefit, land” Now, when it says, “this Act”, it’s referring to the Income Tax Act. But when I went to the Income Tax Act, I could find no definition of emergency event. So I looked through this bill and I looked for where a definition of an emergency event was going to be inserted in the Act somewhere.

Now, perhaps, I’ve missed it—perhaps there’s something sitting in section Y 3. I’m asking the Minister to perhaps point me to where it is sitting in section Y. It might be YA that it would go into. I did then trek on the way through, and it turns out that we’re going to insert, in appropriate order, in the Tax Administration Act, the “emergency event”, all right? So that’s going to be an emergency event as defined in section 4 of the Civil Defence Emergency Management Act—that’s declared as a state emergency under the Act and so on. So there are some good rules there. These are sitting on page 131, as to how we actually do define the emergency event.

I just want to know whether that definition does or will actually sit within the Income Tax Act. In which case, we’re going to need to take that out of that little—it’s not part of the law per se; it’s just the way that it’s written up. It’s got to be taken out of there. So, if the Minister could just clarify that, around the definition of an emergency event.

Just for the member’s interest—and, of course, all those watching at home—about where the definition sits, it’s actually defined in section 4 of the Civil Defence Emergency Management Act 2002. It’s a Government-wide definition, and that is where the definition of an emergency event resides.

Thank you, Mr Chair. I actually just have two short questions for the Minister of Revenue on this part, on clause 53B. I think one of the ones is we have seen sort of consistently throughout this particular part—new section FP 5(1), to give you an example. I wanted to check with the Minister if it’s the standard definition of a person in this case. Are we referring to a legal person? Even if you’re looking at it, often it is phrased as “a person or persons”. So what happens when you have, like, for example, “owns affected revenue property”, but that particular property is owned by more than one person? Does a person, either as a legal entity or as an individual person, cover the idea of a couple, but also in terms of a trust or a trustee? I’m not seeing any other—and potentially it’s in the principal Act, which I haven’t checked yet. So that’s my first question; it’s on the definition of a person where it goes beyond an individual and covers others.

The second part: I also just want to pick up on new section FP 21, inserted by clause 53B. Thank you so much, Minister, for responding to the eight weeks question by my colleague Francisco Hernandez. But I also wanted to check—these new sections from FP 20 to FP 22 are very much around employment-related relief, but what I’m not seeing in this particular section is beneficiary-related relief. I want to check with the Minister whether there are also going to be other forms of relief for beneficiaries, and if it is already covered in existing provisions, whether it is around receiving benefits that would be considered fringe tax in the absence of an emergency event, etc.

So those are my two questions: the definition of a person, which we see throughout this entire section, and is there a particular section or consideration for beneficiary-related relief?

💬 Rachel Boyack: Mr Chair.

Rachel Brooking.

Mr Chair, thank you. I just want to reflect on the question from—

CHAIRPERSON (Teanau Tuiono): I’m sorry—Rachel Boyack. Sorry.

Oh, I thought I might have heard “Brooking”, the other “South Island Rachel B” from the Labour caucus. I’m just responding to the Minister’s response to the questions from my colleague Deborah Russell, and do just want your indulgence here for about 20 seconds on some context about why this is so important and why I’m asking it as the MP for Nelson. It is around that definition of emergency event. In Nelson, we’ve had a significant number of emergency declarations, but they have been at a local level, and I really want to get to the heart of the matter for me, which is the difference between a national emergency and a local emergency.

Bear with me, but I’m going to start with clause 117(6), on page 131 of the bill, where we do have this definition of an “emergency event”, and it “means an emergency as defined in section 4 of the Civil Defence Emergency Management Act 2002 that is—(i) declared as a state of emergency under that Act:”, and then there are two further paragraphs related to the Biosecurity Act, which I’ll just ignore for now. If I look at section 4, which the Minister referenced in his response to the Civil Defence Emergency Management Act, I’ve just had a quick search, but I couldn’t actually find a definition in that section. If I look at the commentary from the IRD from August 2024, it says here that “For the purposes of the Civil Defence Emergency Management Act, an emergency declaration is either:”—and this is quite critical to my question—“a state of national emergency under section 66 of that Act, or a state of local emergency under section 68 of that Act.”

My concern is that when I’m reading through the bill, I can’t actually get a clarity of definition about whether it includes—I’m going to assume it does include—the nationwide emergency, because it would be bizarre if it didn’t, given that that is the most serious level of emergency we can have. But as the Nelson MP, we’ve had the Pigeon Valley fires, and we’ve had the Nelson floods. They were significant local emergencies. We missed out on the bespoke legislation that went through the House a number of times, like Kaikōura, like the Auckland floods. Some of that legislation came to the select committee I was on, the Governance and Administration Committee, and there was representation from councils where we had had those local emergencies that actually had a similar impact to what occurred, for example, in Cyclone Gabrielle, but it was just on a local level.

So you can understand, in that context, why it’s such an important question for me as a local MP. I want to be able to go back to my constituents in Nelson and say that, yes, this bill applies to them or, no, it doesn’t, if we have those similar scenarios. I’ve been trying to look through the various parts of the bill and the Minister’s response, and I can’t find it, so I really would appreciate a response from the Minister. Thank you.

I move, That debate on this question now close.

Thank you, Mr Chairman. I have a question for the Minister of Revenue relating to, I think, what is one of the most often asked questions of Government in the case of an emergency situation in terms of the taxation system, and that is the use of money interest question. Now, this bill, and the emergency provisions, does make changes through an amendment to section 183ABA of the Tax Administration Act, and that allows the commissioner to remit the use of money into interest following the declaration of an emergency event. This is a change in process only, according to the bill commentary, because, currently, the commissioner can choose not to charge interest on late payments. But this is something that obviously causes people a great deal of anxiety in the wake of a natural disaster, and that is usually done by an Order in Council. But the Order in Council power is going to be retained under the amendment which is in this bill, because it’s saying there could be situations where it is not declared as an emergency under the Civil Defence Emergency Management Act of 2002. So I think that’s a prudent backstop, to have that Order in Council backstop for the commissioner to be able to do that, in that rare event.

What I would like to know is whether there are other provisions within these emergency measures where there’s been policy advice or policy discussions that the Minister has had around where we may need to retain some of those backstop ways of putting in support in case the emergency event isn’t declared in accordance within the definition that the Minister has spoken about when he has addressed other aspects of it. So in terms of that very important aspect of use of money interest, it’s laid clear, but I just want to know whether that applies—and it may well be in here and I’ve missed it, but the Minister will be able to point us to it—and whether those backstop provisions for using Orders in Council are retained in regard to other Inland Revenue supports that may be put in place in the wake of an emergency.

💬 Hon Julie Anne Genter: Mr Chair.

Julie Anne Genter—no, the Hon Simon Watts.

Sorry to the member the Hon Julie Anne Genter, but I’ll just answer the question in regards to the emergency event point that was raised before. I think it was in regards to Rachel Boyack’s point in the context of a specific example in her electorate. The clause states that it is a declared event. That can include national and local events. It will depend on the specific circumstances, but one would expect if it is of significant scale that triggers what is considered a local emergency, then, on that basis, it would be captured. But again, it’s case by case.

The question asked by the Hon Dr Megan Woods in the context of use of money interest around section 183 under the Tax Administration Act, the late payments portion—I think the question was: did officials consider more broadly the application of that or whether that is included in the broader bill. The purpose of this bill fundamentally is to deal with emergency response and the related implications of that event, and that is what the officials have targeted in this case, and that’s what the Finance and Expenditure Committee supported.

Kia orana, Mr Chair. This is my first contribution and questions today in this debate. I just wanted to bring up the changes to the FamilyBoost tax credit which are in clause 91C, replacing section MH 3. This is really important to a number of constituents in my electorate, but just more broadly across the country, because access to support for early childhood education is so important for working families and the cost of childcare is incredibly high in New Zealand. Arguably, it’s one of the single most effective things we could do to improve productivity and livelihoods for families is to make it universal, free, part of the public system, and more easily accessible. The Government’s FamilyBoost tax credit, as I understand it, has actually not been claimed by the majority of people who are eligible for it.

So what I’m interested in is whether these changes are estimated to make it easier for people to claim that credit. Has the IRD done any modelling? Are they keeping data on how many people are eligible? What work is the Government doing to ensure that people know that they are eligible, and will this simplify the process of accessing that support or will it make it more difficult?

I notice it’s great that the Finance and Expenditure Committee made some changes to allow late filers to access the FamilyBoost tax credit. However, there are other changes that I’m really not clear on whether it’s going to make it more difficult or more easy or no change whatsoever in terms of families’ ability to access that support.

Thanks to the member the Hon Julie Anne Genter for the question. I acknowledge that the question was going more broadly in terms of the policy intent. But when the policy was brought in, there was an estimate by officials around 100,000 families that would be eligible in that context. Obviously, you’d appreciate that the estimation of that is reliant on how many children that families have and all that, which is a moving feast, obviously.

In the context of the registrations: to date, it’s sitting at around 70,000 of that. So that’s a good way there—it’s more than a majority in that context. The IRD are working actively through their operational matters to increase that number, and it’s something we’re monitoring very closely. But the purpose of this clause is just to deal with some of the more remedial matters that were identified as part of that legislation to make sure it works appropriately.

I want to ask another livestock-related question. It’s part of the emergency relief measures and it’s new Subpart FP 23 as part of Subpart FP. This one is to do with income spreading for forced livestock sales. Now, it’s interesting because, of course, there are already provisions within the Income Tax Act for primary producers—

CHAIRPERSON (Teanau Tuiono): What section is this again?

What’s this? Oh, sorry, it’s clause 53B that introduces all the emergency provisions, but it’s new Subpart FP 23 within that. And it’s on page 84 of the bill if you’re looking.

So there are already existing provisions that allow farmers and some other primary producers—I’d have to go and look it up to know exactly what—to spread their income over a number of years. And that income-spreading provision is in there for a very good reason. It’s because farming, by its nature, can be afflicted by real ups and downs due to the climate and to things like droughts and so on. So farmers already have the ability to spread their income over a number of years. So why, then, was it thought necessary to add some extra provisions in new Subpart FP 23 to allow another sort of spreading of income over years? Why weren’t the existing provisions good enough? What needed to be done to make sure that this better reflected what needed to happen in an emergency situation?

Now, I appreciate it means that they’ll still return all the income over a number of years and so on. That’s not going to change the amount of income they return, but it will change the amount of tax they pay—that’s the point of the income-spreading provisions. But as a policy-type question, I guess, but also a technical one: why weren’t the existing provisions good enough? Why did we have to add in these extra provisions to cope with that situation for farmers?

Thank you, Mr Chair. I have two quick questions for the Minister of Revenue, and I wanted also to thank the Minister for responding to our questions in a concise manner as well.

The first question is on clause 53B, so still on emergency management, on new section FP 16, and both questions are relating to the presumption of duration or period. Now, with FP 16, I just want to get clarification from the Minister on paragraph (a). When we’re looking at depreciation of property and value, it says that “the item was used or available for use immediately before the restriction was imposed;”. So let’s say that there is a property or a chattel, or anything that is currently being restricted due to an emergency event—you can’t use it. The thing is that it mentions “current year”. So let’s say if you were using the property at the beginning of the financial year on 1 April and then you were using it for a month, then in May, suddenly, you have an emergency event, you can’t use that particular property from May onwards until, let’s say, February or March the next year—so, in fact, you haven’t been able to use that for the majority of that financial year. Reading this, does that mean that just because you were able to use that property immediately before the event happened, the depreciated value was still applied despite the fact that you couldn’t use it for most of the time? So I just want to get that clarification.

The second part sort of in relation to what my colleague the Hon Julie Anne Genter mentioned, in terms of the FamilyBoost tax credit in clause 91C—I’m looking at 91C, the newly introduced new section MH 3, subsection (7), which is to do with “Separated persons”. Again, it’s the same thing that I’m looking at in terms of the use of the phrase “at the end of that quarter”. So if we have, let’s say, a couple who separated at the beginning of that quarter and for most of that quarter the two parents are operating individually, therefore, they should technically be able to access the FamilyBoost credit. But if at the end of that quarter one of them or both of them has found another relationship partner, it means that, as read, one or both of them, if they have a relationship partner at the end of that quarter, even though they did not have one for most of that quarter, would no longer be eligible for a FamilyBoost tax credit.

So I am just checking both of those questions—one on depreciation, the value of property with restricted items during an emergency event, and the other one is to do with the definition of kind of, I guess, relationship partner status for separated persons, because that does affect potentially a lot of parents.

Thank you very much, Mr Chair. I’ll come back on the response to the question around livestock income spreading, which I know the members are eagerly anticipating!

So the purpose here is that the current way that the legislation is drafted is that it doesn’t deal with the case of a large cull of livestock—I appreciate that is what it is—but the existing scheme isn’t adequate for that scenario. Obviously, in the context of biosecurity and Mycoplasma bovis, a scenario or an event such as that, then the mechanism needs to be in place to deal with that scenario, and hence why we’ve made the change.

I move, That debate on this question now close.

The question is, That the Minister’s amendments to Part 2 set out on Amendment Paper 247 be agreed to.

Amendments agreed to.