Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill

Hon PETER DUNNE (Minister of Revenue) Link to this

I move, That the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill be now read a second time. The bill proposes a number of taxpayer-friendly measures.

The first of these is a very positive change that will allow New Zealanders to bring their retirement savings with them when they return home from Australia permanently. This will be very good news for the many New Zealanders who work in Australia and who, under Australian law, currently have their compulsory superannuation contributions locked into an Australian complying fund until they reach retirement age. For New Zealanders wishing to return home after a number of years in work in Australia, the prospect of leaving behind these contributions can, and does, present a significant financial dilemma. For some it may mean the difference between bringing their skills and experience back to New Zealand or deciding to remain in Australia.

The changes in this bill will help to overcome that problem by allowing New Zealanders with retirement savings in certain Australian superannuation funds to transfer those funds to KiwiSaver when they return home permanently. Similarly, KiwiSaver members who move to Australia will be able to transfer all their savings in the scheme to an Australian complying superannuation scheme, including contributions from the Crown and any member tax credits. Even New Zealanders who have already returned from working in Australia may now be able to retrieve the contributions they were required to make to Australian superannuation funds.

The ability to transfer superannuation funds across the Tasman will apply once both Australia and New Zealand have enacted the necessary legislation. The New Zealand experience is contained in this bill, and, notwithstanding events in Australia today, it is understood that Australia will introduce its complying legislation later this year. This change is a major step forward. It is the result of an agreement with Australia that was signed in July last year to recognise the close relationship that we share and the benefits that a skilled, mobile labour force can bring to our two countries.

The remainder of the bill focuses on a number of technical or remedial measures to improve the way the tax rules work and to reduce compliance costs for taxpayers. These technical measures include changes to the KiwiSaver rules to make them easier for people to understand and to ensure that the rules work in the way that they were intended to. In particular, the enrolment rules for those under 18 years of age are being clarified so that young people and guardians have greater certainty about their obligations under the scheme.

The bill also clarifies the gift duty rules around gifts such as amenities and art work made to local or central government or to approved donee organisations, by making it clear that such gifts are exempt from gift duty. This change will be welcomed by those who want to contribute to their communities by gifting items such as art works or other items for public benefit. I have recently announced that the Government is intending to repeal gift duty altogether if concerns about creditor protection and social assistance targeting can be addressed. Officials are currently consulting on those matters. My expectation is that if gift duty is to be repealed, the provision will be included in the November tax bill later this year. In the meantime, the provisions in this bill tidy up the operation of the existing gift duty rules.

The bill also sets composite tax rates for 2010-11, which are based on an average of the old and the new rates, to take account of the substantial personal income tax reductions that take effect on 1 October this year.

Other technical amendments that the bill contains are intended to make the tax laws easier to apply. They include changes to the legislation on binding rulings, which set out how the Inland Revenue Department will apply tax laws to give greater certainty about the tax implications of business decisions.

Other changes in the bill are of a remedial nature. They remove certain unintended consequences following earlier reforms. Further to those changes, I advise the House that at the Committee stage I shall release a Supplementary Order Paper relating to several other measures. The most important of those will be to remove the taxation impediments for banks and their covered bond programmes. The rest will be of a more remedial nature, but all of them need to be legislated for as soon as possible. Included amongst those other matters is an adjustment to the prospect of tax treatment of certain optional convertible notes, and minor changes to the transitional life insurance rules. These are both changes that taxpayers have asked for.

In bringing the bill to its second reading, I want to record my thanks to all the members of the Finance and Expenditure Committee for their consideration of the bill and for their work in further refining and clarifying its content. The result of their efforts is a package of measures that will help to improve the way the tax rules work across a number of areas, and in so doing will reduce compliance costs for taxpayers. I therefore with pleasure commend this bill to the attention of the House.

Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this

I rise to take a call on behalf of the Labour Opposition in response to the second reading speech of the Minister of Revenue, the Hon Peter Dunne, on the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. Labour supports this bill. When members of the public are watching Parliament on television or listening to it on the radio, particularly if the main time they listen to it is around question time or the Wednesday general debate, they sometimes go away thinking that the entire business of this House consists of members calling each other names or attacking each other across the floor. Of course, that is not true. It is on occasions such as this, when we have a largely technical bill, one that makes needed improvements to our tax legislation and is not particularly partisan, a bill which was started under the previous Labour administration, and continued—by the same Minister, it might be observed—in the current one, that we see Parliament at its work in a select committee and in the House making sure that the detail is up to snuff and that the bill will have the effect that it is intended to have. There has been good cooperation in the Finance and Expenditure Committee. I commend its chairman, Craig Foss, and members on all sides for a constructive approach that was taken to this bill.

On process matters, however, I observe one word of slight disappointment, and that is that I heard today that the Minister has a substantive Supplementary Order Paper about banks, covered bond programmes, and other matters, to be introduced in the Committee of the whole House stage. I think it is a matter of some regret that that material was not introduced and subjected to the very useful and open select committee process that had previously ensued. Were the justification for that step simply that taxpayers wanted it, there might be all manner of changes to the tax law that the Minister might propose. He might drop rates to zero! The Budget went part of the way there in some regards. He might get it into his head to go all the way. There must be another reason for that. We will not prejudge it, but I will record now that it is not good practice for this House to face substantive Supplementary Order Papers on the floor, when that could have been avoided in a bipartisan process.

I will briefly touch on the summary of the bill’s provisions. I will raise a couple of specific matters, and then talk about the context for a minute or two. The bill introduces the following: the trans-Tasman portability of retirement savings. That is the most important measure in the bill, in my view. It applies to New Zealanders who have not opted out of KiwiSaver hitherto, and who move across the Tasman for family or employment reasons. It might be observed that they will not be going for lower tax rates, because tax rates in Australia are significantly higher than tax rates in New Zealand. But if they move across the Tasman, they can take their KiwiSaver savings with them, rather than, as previously, having to wait until they are 65 to collect them. That will be important to them if they are setting up a new home.

However, I think this needs to be monitored. It is bipartisan, but we need to monitor it, because if there is a perverse effect such that the early release of substantial KiwiSaver funds acts as an incentive for people to move across the Tasman, we might find that it runs contrary to other objectives of the Government, such as closing the gap with Australia or stopping the brain drain—although we are hearing less and less about those measures as the gap widens and more Kiwis leave.

The next point is that there are new rules for under-18-year-olds seeking to enrol in KiwiSaver, where the parents’ or guardians’ permission is required. That is absolutely sensible, although we would note that we strongly believe—and I will expand on this later—that KiwiSaver remains a very, very important step towards closing the country’s yawning savings deficit and thereby assisting to reduce the current account deficit.

The bill introduces flexibility in a provision applying to resident cooperative companies that require a member to hold shares in proportion to their trading stock transactions with the company. As cooperatives become a broader and more important part of our economy, that flexibility is to be welcomed.

There is the effective cancellation of branch equivalent tax account debits, and there is a 5-year tax exemption on profits for non-residents operating offshore rigs or seismic vessels in New Zealand. I would not be surprised if some member moves an amendment that states “provided that they do not spew oil all over our beaches”. Let us hope that they do not. We will of course hold the accountability instruments of the Government to account in that regard.

There are a number of new rules relating to binding rulings. Binding rulings are important, but sometimes it is to be observed that the private sector, might we say it, uses a ruling for purposes beyond that for which it was originally intended. One can think of certain large-scale banking transactions that have been reversed by the courts and by negotiation with the Inland Revenue Department, where there was allegedly an unfit purpose for which binding rulings were quoted. However, the changes in the bill are useful.

There is an exemption from gift duty for gifts made to local or central government, donee organisations, and distributions of property made in accordance with certain court orders—and we are pleased to admit Cure Kids to the list of charitable donee organisations.

I will touch on three broader themes that attach themselves to the bill. The first is concerning retirement savings, the second is about KiwiSaver, and the third is about anti-avoidance measures, which relate to the provisions for loss attributing qualifying companies in clauses 20G and 20H of the bill. Firstly, on retirement savings portability, Labour, as I have said before, believes that it is a sensible arrangement. That is the Minister’s favourite word, and it is embodied in the bill. It allows more flexibility for New Zealanders. The chief policy risk is that there is a perverse effect, whereby the flexibility around KiwiSaver deductions becomes somewhat greater, or it is easier for New Zealanders to get their money out of the scheme if they go across the Ditch to live in Aussie. They can take their KiwiSaver savings with them earlier than they might be able to access them in New Zealand. We will just need to monitor that. I believe that people will make their decisions about where they live for other and different reasons, but it is not beyond the realm of possibility that we may need to come back and look at that in the future.

It is a positive step for current and future New Zealand superannuitants, and this Government has, however, ultimately undermined their future security by other measures. It would be remiss of me, notwithstanding the bipartisan nature of this legislation, not to note again for this House that there has been a grievous broken promise in regard to superannuation repeated once again in Budget 2010. The single biggest decision, if we can call it that, that was made in regard to Budget 2009 was the decade of deferrals of the pre-funding of New Zealand superannuation. As members and listeners will recall, that pre-funding—the paying into the New Zealand Superannuation Fund of $2 billion or $3 billion a year to build up a fund about the size of the New Zealand economy of $160 billion—was there to support the baby boom as they moved through to superannuation. Otherwise, there would not be enough tax revenue to pay their pension. By not pre-funding, the Government has put at risk the future of superannuation. There are no two ways about that.

In Budget 2010, not only has National broken its promise to recommence pre-funding when the Government’s books are in surplus—that is now 2016, and the pre-funding does not supposedly resume until 2019, 3 years later—but even then, I note that in the fiscal risks section of the Budget documents that funding stream has been removed as “no longer required”. I am sure Grey Power members will be extremely concerned to hear that. We are extremely concerned. We think it is irresponsible, and I have made my point on that, I believe.

On KiwiSaver, likewise, at a time when the National Government, the Labour Opposition, and members on the cross benches are all remarkably agreed on the need to rebalance this economy in the wake of the global financial crisis, in the wake of the then exposed housing and property bubble, and at a time when we all agree that the key ingredient to narrowing the financial deficit on our current account, which drives the whole kit and caboodle, is to improve our domestic savings rate, how silly it now seems that one of the first moves the incoming Government made was to halve the incentives for ordinary Kiwis to participate in KiwiSaver, taking it from 4 percent to 2 percent. That is a matter of great regret, and I think it is a measure that everybody in this House will come to regret. Labour is pledging again today that we will not only restore KiwiSaver but also take it forward. We believe it is a very, very important measure.

My final point in conclusion is just a small point on loss attributing qualifying companies. There are a couple of technical measures in the bill, clauses 20G and 20H, which make them easier to use. We expect further substantive reform from this Government to tighten the provisions on loss attributing qualifying companies, because they are a black hole.

CRAIG FOSS (National—Tukituki) Link to this

I acknowledge previous speakers. I thank the Finance and Expenditure Committee for its participation in the work done on the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill before us now. It has changed a bit since it arrived at our committee, and I congratulate Minister Dunne, in particular, but also Minister English and Minister Power, because this bill is part of the negotiations on a single economic market with Australia. They are all involved in these discussions and reaching agreement. As Minister Dunne just noted, some changes are still to happen on the Australian side, but the goodwill and good faith are there, and they will be facilitated.

I also thank the officials of our committee and the Inland Revenue Department for their advice, and particularly our specialist tax adviser Therese Turner. Almost by default, we have an independent drafting specialist adviser, Mr David McLay, in this instance for this tax bill. Of course, I thank members of the Finance and Expenditure Committee. The Hon David Cunliffe is quite right: the committee worked very well together on this bill, and saw what it needed to do to make some changes and amendments to the bill that came before us.

I will not be making a long speech, but I raise a couple of points in the bill that we will be addressing in the Committee stage. Of interest to submitters—I think there were about 18 of them—were the binding rulings, around which there was a fair bit of discussion; solid representation from the professional sector; and particularly the branch equivalent tax account debit changes. There were some quite robust submissions on those issues. I think the committee as a whole learnt a fair bit about that. We have made substantive changes to what was originally proposed in the bill that came to the committee. Generally, we have found pretty good common-sense solutions, which follow intent and acknowledge original notice given to the proposed changes.

Another item that had discussion was the remedial amendments to KiwiSaver. As policy as large as KiwiSaver pans out, some changes need to come on the way through. But particularly in respect of the treatment for under-18s in KiwiSaver, there were some quite strong allegations of children being signed up without necessary knowledge of their parents. Suddenly an 18-year-old is making a decision, for the rest of his or her life, to opt into KiwiSaver, and we thought that was unfair, so we had some good advice on that.

I agreed with most of what the previous speaker, the Hon David Cunliffe, said until he got to his context part. We reject totally his allegations of a broken promise in and around superannuation, but we will save that for another day. I will leave the House with one point: when the Government is borrowing about $14 billion and paying something like 5.5 percent for it, and it has financial assets on the other side achieving something like 4 percent for it, well, there is 1.5 percent worth of quite substantial loss to the taxpayer. Simply trying to keep one organisation going while funding another one is like having a $400,000 mortgage and a $200,000 savings scheme. One gives away the spread both ways, but at the end of the day the taxpayer is the loser.

I look forward to the Committee stage of this bill. I commend the bill to the House.

Hon DAVID PARKER (Labour) Link to this

The previous speaker, Craig Foss, made reference to the fact that the Government is borrowing money. Why, then, did the Government increase the amount of money that it was borrowing in order to fund tax cuts that go so disproportionately to the people in society who are already best off?

I turn to the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. As previous speakers have said on behalf of the Labour Party, we support this bill, which improves the portability of retirement savings between New Zealand and Australia. There are some restrictions on portability that I know will disappoint some people. For example, KiwiSaver contributions can be used by a first-home purchaser to go towards the deposit. But, as I understand it, the agreement in respect of portability with Australia means that the savings that are transferred from an Australian scheme to a KiwiSaver scheme cannot be used towards a house purchase in New Zealand, and that is a sad detriment. Let us hope that sometime in the future that might be able to be fixed.

A couple of points need to be made in the discussion about KiwiSaver. Firstly, New Zealand has an abysmal savings record. We really do have a poor savings record. New Zealand has, for many years, spent more than it earns, and that is reflected in our current account deficit. Increasingly, it is reflected in the non-tradable part of our current account deficit, in the amount of interest and dividends that flow to other parts of the world as a consequence of us owing ever-greater amounts to overseas jurisdictions. Of course, this bill, which improves portability of retirement savings between Australia and New Zealand, exists only because the previous Government introduced KiwiSaver. Were it not for that, we would not have portability of retirement savings.

It is notable that the National Government opposed the Budget when we introduced KiwiSaver. Its mantra at the time was that we should have been having more income tax cuts, which would have meant we could not afford the incentives that were put in place by KiwiSaver. Indeed, following National’s election to Government, the National-led Government, faced with a choice between keeping the generosity of KiwiSaver and delivering income tax cuts, opted for income tax cuts ahead of improved savings. This was a bad mistake for New Zealand. Even though KiwiSaver has begun to improve New Zealand’s savings record, it is still lamentably poor when compared with, for example, Australia’s. Australia is going in the opposite direction. Australia announced in its latest Budget that over the next few years it is increasing compulsory savings through its workplace superannuation scheme from 9 percent of earnings, which it currently is, to 12 percent. That makes our savings look lamentably poor.

The National Government has a mantra that says that this latest Budget is the greatest tax switch, or something like that, in the last 20 years, and that somehow it is changing the shape of the New Zealand economy in a dramatic way following its last Budget. We all know that that is an exaggeration. There is a change towards taxing consumption through GST with reciprocal decreases to income tax, but of course there are two things to be noted about that. Most of the net benefit of that goes to the people who are the highest earners. The total proportion of tax that is paid by the lower two-thirds of earners goes up, and the proportion of tax paid by the higher earners goes down. The other point is that low to middle income earners generally have to spend all of their earnings to live. Although they might have an increase in their income after the deduction of income tax, they spend it all. They have to pay GST on everything that they spend, essentially, or most of what they spend, and therefore they do not end up much better off.

If the Government was really interested in catching up with Australia, it would have addressed the biggest difference between New Zealand and Australia, which is savings and investment. Australia has more savings, it has deeper capital markets, and it has more money to invest in profitable, sophisticated enterprises that generate foreign exchange earnings, and Australia also avoids ownership of its own country by overseas interests to the same extent. Of course, if we sell something to an overseas party because we are running such an enormous current account deficit as New Zealand is, in the end the overseas party gets the dividend flows from the future profits of the enterprises that it has purchased from New Zealanders. In the case of lending to New Zealanders via banks, that overseas party also get the interest flows.

If people do not believe that that is the biggest difference between New Zealand and Australia, and if they really do think the big difference between New Zealand and Australia is mining, they are sadly mistaken. I saw a presentation recently from Rick Boven from the New Zealand Institute, who told us that mining accounts for approximately 10 percent of the difference between the earnings in Australia and New Zealand. It is not even the majority; it is 10 percent. There might be some other flow-on benefits to other parts of the economy, but essentially 10 percent of the difference lies in mining, which is not as the Minister for Economic Development, Gerry Brownlee, would have us believe. The big difference lies in capital markets and savings. If we want an example of that, we should reflect on the fact that in 2007 the combined profit of the four biggest banks in New Zealand was more than the combined profit of the rest of the NZX 50—that is, the 50 largest companies in New Zealand listed on the New Zealand Exchange. The combined profit of those four banks was greater than the profits of the balance of the NZX 50.

We should then reflect on the fact that those four banks are Australian-owned. The Australians own not just their own banks, they own ours. The collective profitability of those banks is bigger than the rest of the NZX 50. We do not have much left there that we own, either. It is absolutely clear that the big difference between New Zealand and Australia lies in the fact that over the years Australia has saved. I am pleased to see Sir Roger Douglas in the House. I am pleased to again acknowledge him in respect of the changes that he has tried to make in New Zealand for close to 40 years on this issue. It goes back to the Kirk savings scheme, which Sir Roger was responsible for the design of, and subsequent moves. Every time a Labour Government takes steps towards the progress that Australia has made—actually, the Australians started later than Kirk, and look what it has done for them—National comes in and undermines it.

It is good that this portability legislation is before the House today. It would not be here but for the introduction of KiwiSaver by the previous Government. But, more important, it is an opportunity for us to reflect on why New Zealand is so much less economically well off compared with Australia, and it relates to savings. I really cannot emphasise that point enough. The big difference between New Zealand and Australia is savings and investment.

Another area that is related to this, which is not addressed by the bill but which I think needs to be considered, is the tax mix in New Zealand. Our tax mix is different from that of Australia and the rest of the OECD. Despite Bill English’s comments to the contrary, his so-called tax switch did nothing significant to change that. National’s tax switch not only was unaffordable in terms of the effect on the Government deficit but has also increased the tax burden of businesses, as opposed to individuals. Given that we rely upon businesses to generate the wealth that we need to earn incomes and generate the taxation revenue that the Government needs to pay for health and education, it seemed to me to be a retrograde step—particularly the reduction in depreciation for short-lived assets that are so expensive for our export businesses to purchase.

Trans-Tasman portability of retirement savings is a good thing. It is sad that we cannot enable people to use them for a first-home purchase deposit if they bring back money from Australia. It is progress, none the less. But the big difference between New Zealand and Australia is savings. This bill is an opportunity to highlight that. Thank you.

AMY ADAMS (National—Selwyn) Link to this

It is a pleasure to take a call this afternoon on the second reading of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. I was part of the Finance and Expenditure Committee that examined the bill. Tax legislation is possibly not the most stimulating of topics that we deal with in this House, and for a wider audience it possibly does not generate the highest levels of interest. But it was quite an interesting process to work through the bill, which enjoys a broad level of support in the House, and I think that is sensible.

There are certainly sensible measures within the bill, such as allowing much easier flow of retirement savings between New Zealand and Australia. That is a welcome step. Many, many New Zealanders who have worked in Australia and been subject to its compulsory retirement savings scheme have come back to New Zealand and been unable to access or transfer those funds, and in the time between their transfer back to New Zealand and their reaching retirement age they have simply lost touch with those funds. Huge sums of money in Australia have not found their way back to their rightful owners. Anything we can do to ensure New Zealanders get the benefit of retirement savings they have made in Australia—and similarly for New Zealanders who go to Australia—is to be encouraged and applauded, and I certainly do that.

I will briefly touch on two other aspects of the bill that I found interesting during its passage through the Finance and Expenditure Committee. The first of those tidies up the rules for under-18-year-olds enrolling in KiwiSaver. Some traps in that process had been discovered that we had to work through. We looked at some interesting issues in relation to guardianship and the various situations that under-18-year-olds might find themselves in. The committee spent a bit of time on that, with help from officials, and I am comfortable that the position we have come to is a sensible one.

The last matter I want to touch on briefly in this contribution is the reasonably well overlooked provisions in this legislation relating to binding rulings. Binding rulings are a part of tax law that I am very interested in because I think they are a very, very important part of our tax structure whereby we enable taxpayers to find out in advance what the tax consequences will be, rather than saying: “Have a go, enter in, then we’ll tell you later whether you’ve got it badly wrong.” They are a very valuable part of our tax system and one that I would like to see better utilised. So I applaud anything that clarifies the way in which they work. Although the provisions in the bill seem restrictive on the face of it, they make it clear where the Commissioner of Inland Revenue can and cannot issue a binding ruling. To the extent that they will help taxpayers and their advisers better understand that process and know when to use it, I think they are a welcome step, and I certainly encourage taxpayers to take full of advantage of them. As I said, any step we can take to enable people to understand how tax law will affect them at the front end of a transaction is to be welcomed. I commend the bill.

STUART NASH (Labour) Link to this

I rise to support the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. There is no doubt that that is quite a mouthful. It is another bill that was started under Labour that is being debated in this session of urgency. The bill is supported by all in the House. It is a sensible bill and it goes a long way to clearing up a few areas and making it easier for people to understand tax matters.

As has already been mentioned, the main provision is the introduction of changes to the tax rules to allow New Zealanders returning home from Australia, or Australians deciding that this is really the best place in the world to live, to bring their retirement savings with them, and for New Zealanders to take their retirement savings to Australia if they decide that the land of no clouds, severe water shortages, and a million Russel Normans is better than Godzone. The bill also includes a number of technical changes to the rules surrounding KiwiSaver, gift duty exemptions, and binding rulings to improve the way in which the rules work and to reduce compliance costs for taxpayers.

In regard to retirement savings portability, as mentioned, it is a sensible arrangement. We have been told that under this scheme potentially $16.6 billion in lost contributions from New Zealanders working in Australia would come back to New Zealand. Even if a fraction of that money was to come back home it would have a positive impact. When we consider how the country has been hollowed out to the tune of hundreds of millions of dollars as a result of the finance company collapses, then any money that returns this way in the form of savings is more than welcome.

And, of course, Australians know how to save. As my colleague David Parker alluded to, the Australian superannuation scheme is light years ahead of the New Zealand equivalent. That this Government keeps comparing itself with Australia’s is a little strange, if not downright disingenuous, all things considered. This National Government has ultimately undermined its commitment to New Zealand superannuation. We have the Cullen fund, which was designed as a top-up to the Government’s national superannuation, and this Government axed contributions to it. Since this decision was taken by Mr English, the Cullen fund has gone on to make a small fortune as the global equity markets have recovered in the wake of the global financial economic crisis. Then we have KiwiSaver. About 1 million Kiwis have taken up this scheme. I ask Iain Lees-Galloway whether he remembers who developed KiwiSaver. Was it a Labour Government?

AARON GILMORE (National) Link to this

It is a great pleasure to follow that invigorating speech from the wonderful revenue spokesperson from the Opposition, Stuart Nash. This Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill contains a whole lot of issues and tidy-up matters, and I will focus on a couple of the remedial matters. We are a Government, unlike others in the world, that is making the tax system simpler and easier, and reducing costs to people, and I think they are really neat things.

A couple of good provisions in this bill have not been touched on by previous speakers, and I think they are worth mentioning. One of those is the exemption from gift duty for the gifting of assets to city council organisations. We had a couple of submitters who were very keen to make sure that that measure went through. This arose when there were a number of organisations gifting certain assets to local government, in particular, which would result in gift duty. That really was not a sensible situation, and it discouraged the gifting of assets to local government. So there is an exemption in the legislation that allows for transfers to be made to local or central government. There have been some quite high-profile cases where if this measure had not been passed, there would have been some particular issues and problems that would have discouraged sensible gifting arrangements.

The other thing I want to touch on is the issue of the branch equivalent tax account debits—or BETA debits. For people like me who happen to be qualified accountants, this is quite an exciting aspect of the tax law. But for most people this is something that makes them shake their heads and roll their eyes. I can see Mr Garrett doing the same. These things are quite important because they allow for the offsets that exist when companies are investing overseas. Some other changes have been made in order to simplify tax law, so the need for this particular aspect of tax law has been removed as a result of this bill. I think that is a really good thing. Again, this is a Government that believes in simplification, and that was a good step forward.

We had a very good chairperson through this select committee process in Craig Foss—and I note that Mr Nash over there passed over him in his speech. He is a wonderful MP from the Tukituki—a beautiful part of the world, in the Hawke’s Bay. I thought we had wonderful work from the officials, who tried to grapple with some very complicated matters. I know that tax is never the most exciting topic at the best of times, but they made it interesting enough for members who did not quite have a tax background to get their heads around it and understand the importance of some of these changes, and I think that is a good thing. This bill wraps up all of that stuff in a way that it can be understood, and it sorts a whole lot of things out.

I do not want to touch on anything more in particular on the tax changes. A few barbs have been thrown from the Opposition about some of the wider issues around superannuation, but the issue of savings and investment is part of a journey. This bill is another step along that journey towards improving our savings rates and encouraging people, with the right incentives, to do a bit more and bring more savings back to New Zealand—and that has to be neat. For those Kiwis coming home to New Zealand—and there have been hundreds of thousands of them coming home in the last 18 months under a John Key - led Government—this bill will allow them to bring their savings through with KiwiSaver, and I think that is a good step forward to bolster our private savings effort.

I finish off by talking about an issue that is quite exciting—the continuing exemption for offshore oil drilling operators. I know that there is some fear and loathing about that, but I think that that has the potential to bring significant funds into New Zealand, and that has to be a wonderful thing. Thank you very much.

BRENDON BURNS (Labour—Christchurch Central) Link to this

I am very pleased as a member of the Finance and Expenditure Committee to contribute to the second reading debate of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill. It is in large part a wash-up bill for a number of measures, but the most important parts of it, at the heart of the bill, are the key changes that make it much easier for trans-Tasman retirement savings to be moved from one side of the Tasman to the other. That is an absolutely essential change.

I think that just about every member of this House would acknowledge that although we still remain very firmly two countries, we are also very much one market. There is a huge flow of people from one side of the Tasman to the other, and it is not all a two-way trade. I imagine that we might see soon a former Australian Prime Minister in retirement, perhaps, and we might have a Socceroos coach looking for somewhere to bolthole for awhile. So these people and many, many others might well need the benefits of a better flow of trans-Tasman portable superannuation savings. It happens across the age spectrum. My dear late parents emigrated to Australia 8 years ago at the age of 82, with two of my brothers living there. They may have got some modest benefit from these changes.

The KiwiSaver scheme was extraordinarily well-designed by Michael Cullen, and I think there was probably input from the then Minister of Revenue and current Minister of Revenue, Peter Dunne. In fact, the KiwiSaver regime did and still does allow New Zealanders to take their savings to Australia. Currently, and unfortunately, the matter being addressed by this bill is that those New Zealanders who live in Australia are not so able to move their savings back over here should they wish, upon retirement, to return to the land of their birth.

We are talking about sums estimated at A$13 billion or NZ$16.5 billion, and they are amounts that are bigger perhaps than the health budget in this country. We are talking about very, very large amounts of money, and I think that has the effect of locking New Zealanders who might wish to return home for their final years into staying in Australia beyond the time they would prefer to come home. So this is a very sensible and even essential set of changes to allow a better flow of trans-Tasman savings. It is a step forward in that respect.

That said, obviously when we look at the whole context of savings we do need to note that at the same time that the Government assists with this step forward it takes two steps backwards when we consider the broader view of superannuation. The first thing, of course, was the decision in last year’s Budget to suspend contributions to the New Zealand Superannuation Fund. I noted the comment from Finance and Expenditure Committee chair, Craig Foss, a speech or two ago that it is not appropriate to borrow for savings. Of course, that does not apply when the Government wants to borrow to fund tax cuts as it has done in this year’s Budget—that is a perfectly appropriate thing to do. The other thing is that the analysis earlier last year was that the New Zealand Superannuation Fund was losing money and therefore it should not be invested in, when in fact the latest Treasury figures show that the Government’s superannuation fund—the national superannuation fund, the Cullen fund—has bounced right back and is contributing positively, back well and truly into the black.

The other thing to note in this year’s Budget in respect of the superannuation fund is that although we will back in surplus—now projected to be in 5 years—contributions to the New Zealand Superannuation Fund would still be suspended for another 4 years. So we know that the Government has taken a philosophical position about savings, and continues a pattern of behaviour by National Governments over the generations—to not truly support retirement savings. This goes right back to Muldoon’s axing of the excellent Kirk-Rowling Government scheme in 1972-75, which, as has quite rightly been acknowledged, could well be a multibillion dollar fund. It could be projecting us into prosperity if it had been left in place rather than used as a cynical electoral ploy in the 1975 election.

But let us move back to the current period and look at KiwiSaver, which, of course, has been subject to some amendments through this bill. I note the recent Australian Budget, where employer contributions are required to rise to 12 percent of an employee’s salary, and I note that New Zealand’s Budget last year cut the employer contribution to KiwiSaver from 4 percent to 2 percent. So we now have a 10 percent differential between what one can receive in one’s retirement savings scheme via one’s employer on that side of the Tasman as opposed to this side of the Tasman. That really is a betrayal, I think, of those 1.2 million Kiwis who have signed up to KiwiSaver. National has actually gutted the KiwiSaver scheme in large part. That really is most unfortunate.

I want touch on Supplementary Order Paper 105, which the Minister has put forward. I acknowledge the Minister’s move in this area around the Screen Production Incentive Fund. This fund was introduced by the previous Labour Government in 2008 as a measure of assistance to the film industry. In legislation passed last year, changes were made around the taxation treatment of what is known within the industry as “SPIF”, the Screen Production Incentive Fund, and grants from it. The logic of the advice at that time was if a film producer was receiving a grant from the Government, then that person should not get any particular assistance with tax treatment any more fully.

The problem with that was it created a differential treatment between films that received other Government funding, such as through the New Zealand Film Commission, and those that received funding through the Screen Production Incentive Fund. The net effect of that was that any film that did not get a Screen Production Incentive Fund grant was able to immediately start claiming the tax deductions that are obviously needed in the film industry—some make money; a lot do not—but the treatment of a film that received a Screen Production Incentive Fund grant meant that one would have to wait up to 3 years to get any offset against the investment of the film grant.

I acknowledge the Minister. He has listened to the New Zealand film industry, which has pointed out this anomaly and the implications of it for the film industry. It is an industry that, as I noted, either does very well or bombs. People lose large amounts of money very regularly in the film industry. So I acknowledge the Minister’s Supplementary Order Paper, which tidies up that issue on behalf of the film industry and puts things on a more equitable basis.

I go back to the new rules around trans-Tasman portability of savings. I acknowledge that the KiwiSaver scheme already has portability inherent in it, because it was well designed by Michael Cullen and the last Labour Government. But this bill will make some changes to the rules around those who permanently emigrate to Australia, and also will now allow New Zealanders resident in Australian who have contributed to a savings scheme in Australia—with those large volumes of employer contributions—to benefit from the return of those funds to New Zealand if they decide to come back here to retire.

There are some constraints as to what one can do with Australian-sourced savings. For instance, if one returns to New Zealand one cannot use it towards any of the KiwiSaver housing-related incentives. Some members may recall that one could use KiwiSaver towards a first home deposit, and so on. So there are limitations upon it, but in the broad sweep of things it is a very, very positive move. It will allow New Zealanders who have contributed—sometimes over 20, 30, or 40 years—to Australian-based superannuation schemes to repatriate those funds back to New Zealand to see them into a well-funded retirement.

These changes are very, very good moves in respect of many thousands of New Zealanders. I think these measures will be an incentive for New Zealanders who currently may be trapped in Australia with quite generous superannuation schemes but were not, until this legislation, able to repatriate those funds, bring them home, and set themselves up for their retirement. Anything that encourages New Zealanders to return to the land of their birth has to be applauded and supported, and that is why Labour has been very, very firmly supportive of this bill.

Finally, I acknowledge Craig Foss, the chair of the select committee, and the officials who supported us through the processing of this bill. Thank you very much.