Parliamentary debates: Friday, 23 May 2025

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

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

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

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

We discussed this yesterday.

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

That’s what we get with interjections, so let’s come back to Subpart DI 4.

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

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

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

A convention centre.

—it’s gone—or a convention centre.

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

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

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

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

That’s true, but that’s not what the member asked the Minister, thank you.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Is someone wanting to take a call over this side—

Yes.

—because we have not finished Part 1. So if it’s a call, I’ll—

They’re all trying to take a call!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Could you please quote the number of your amendment?

I don’t think I have a number, because it’s a tabled amendment.

Oh, OK. You’ve outlined it anyway, so we’ll find it.

I’ve outlined it. It should be on the Table.

Thank you. We’ll find it.

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

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

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

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

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

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

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

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

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

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

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

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

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

You carry on.

Great, excellent—two working ears.

I can hear out of this ear, as well.

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

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

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

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

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

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

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

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

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

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

Just a very quick question about what—

Madam Chair.

Oh, was that a point of order?

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

Oh, OK—sorry.

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

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

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

The Hon Dr Deborah Russell—new questions, please.

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

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

61,000.

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

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

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

Oh, absolutely.

—because we’ll have the large part of the discussion on KiwiSaver in Part 2.

Well, I disagree, Madam Chair. If we look at clause 13, that is exactly where the—

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

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

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

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

You are means-testing retirements savings—justify that.

Well, right—OK.

I think we’ll leave the member who is speaking to ask the questions, thank you. The Hon Dr Deborah Russell is speaking.

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

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

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

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

I move—

Point of order, Madam Chairperson.

I’ve got a point of order coming from my left.

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

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

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

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

I move, That debate on this question now close.

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

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

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

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

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

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

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

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

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

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

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

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

The question is that the Hon Dr Duncan Webb’s tabled amendment to clause 5, new section DI 4(b), to insert subparagraph (v), be agreed to.

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

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 5, new section DI 5(1), to replace “0.2” with “0.1”, be agreed to.

The question is that the Hon Dr Megan Woods’ tabled amendment to clause 5, new section DI 5(1), to change the formula to “0.27 x (expenditure - contribution)”, be agreed to.

The question is that Ingrid Leary’s tabled amendment to clause 5, new section DI 5(1), to change the formula to “0.25 x (expenditure - contribution)”, be agreed to.

The question is that Ingrid Leary’s tabled amendment to clause 5, new section DI 5(1), to change the formula to “0.22 x (expenditure - contribution)”, be agreed to.

The question is that the Hon Dr Megan Woods’ tabled amendment to clause 5, new section DI 5(1), to change the formula to “0.3 x (expenditure - contribution)”, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 5, to delete new section DI 6, be agreed to.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 5, new section DI 6(b), be agreed to.

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

The question is that Arena Williams’ tabled amendment to clause 7(1), to replace “$44,900” with “$50,000”, be agreed to.

The question is that the Rt Hon Adrian Rurawhe’s tabled amendment to clause 7(1) and (2) be agreed to.

The question is that Arena Williams’ tabled amendment to clause 7(2), to replace $44,900 with $50,000, be agreed to.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 8, section MG 3(2)(b)(i), to replace “1 April 2026” with “22 May 2025”, be agreed to.

The question is that the Hon Barbara Edmonds’ tabled amendment to delete clause 8 be agreed to.

The question is that Arena Williams’ tabled amendment to clause 11, to delete new section MK 2B, be agreed to.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 13, to delete subclauses (2)(a) and (3), be agreed to.

The question is that the Hon Dr Deborah Russell’s tabled amendment to clause 13, to delete subclauses (2) and (4), be agreed to.

The Hon Barbara Edmonds’ tabled amendment to clause 13(2)(a) and (b) is out of order as being inconsistent with the principle and objects of the bill.

The question is that Glen Bennett’s tabled amendment to clause 13(2)(b), to replace “$260.72” with “$450”, be agreed to.

The question is that Glen Bennett’s tabled amendment to clause 13(2)(b), to replace “$260.72” with “$400”, be agreed to.

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

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

Members, we now come to Part 2. This is the debate on clauses 17 to 30, the “Amendments to other enactments”. Part 2 contains changes to the KiwiSaver regime as well as changes to the Tax Administration Act 1994. The question is that Part 2 stand part.

Point of order. Thank you, Madam Chair. I refer to two matters. Before the closure motion and the vote on Part 1, the Chair seemed to indicate that, despite the end of Part 1, those elements of KiwiSaver from Part 1 could be debated in Part 2. I just want to confirm that that’s the case, mainly because it is a bit odd given that we’ve voted on amendments to KiwiSaver clauses—but that’s what she indicated. There were very few calls on KiwiSaver and I note that colleagues from the Green Party and Te Pāti Māori were seeking calls but were not given the opportunities to speak on that part of Part 1—

I understand.

So my question, just for clarity of the committee, is: have I heard that correctly?

You have heard that correctly, sir. I was watching the debate and I heard the previous Chair make reference to being able to go back, where relevant, into clause 1 as it relates to KiwiSaver.

Speaking to the point of order. I just want to really, really clarify this because, with respect, the operative changes to the KiwiSaver regime actually occurred in Part 1. The Chair seemed to think that we could, in actual fact, discuss those operative changes in Part 2, but that’s going to be very hard because we can’t relate them to a clause in Part 2—they actually sit in Part 1. The amendments in Part 2 are very, very technical and just to do with a very small part of the changes. So may I suggest, provided we bring up new points, that we have a rather more thematic debate in Part 2 around KiwiSaver? We could confine it to KiwiSaver and always make sure we are bringing up a new idea rather than repeating ideas, rather than trying to relate specifically to clauses.

Speaking to the point of order.

I’ll just take some advice from the Clerk. Speaking to the point of order, Tim van de Molen.

Thank you, Madam Chair. There is, obviously, under Part 2, clause 17, which relates to KiwiSaver. My understanding of the comments from the Chair during the previous part were that KiwiSaver can, of course, be debated in Part 2 because there is a clause for that. But it would not be appropriate to give the committee the ability to rehash everything in the clause 1 aspects of KiwiSaver because, of course, that’s been dealt with and voted on and completed under that part. So it should indeed be constrained to this part.

We’re all in agreement. I think everyone understands as it—and I did listen to the previous Chair and she has provided me with confirmation of her ruling. So I think you’re correct, Dr Russell, that we can refer back to clause 1 as it relates to KiwiSaver. But I think we’ll just see how the substantive questions come through. To your point about the repetition, we will be very alert to that. Thank you.

Speaking to the amendments to KiwiSaver in general, there is some debate that we need to have around the substantive changes. Now, in actual fact, there are three substantive changes, and I think we’ll need to speak to the policy intent behind them. The three substantive changes are: one, the change to the member tax credit, which is being halved, so it’s going down to two hundred and forty-something-or-other dollars. The second substantial change, and it’s a change that this party, at least, supports, is the change to enable 16- and 17-year-olds to participate in KiwiSaver, to receive employer contributions, and to receive the member tax credit. Now, given that we agree to that, in this party, my party doesn’t feel the need, particularly, to discuss that particular change for 16- and 17-year-olds, other than to endorse it. But the third substantive change is the change that puts in a top threshold for KiwiSaver, and it says that people earning over $180,000 may not receive the member tax credit.

I have two points I want to make about that one. The two points are these—the first question is: why $180,000? What was the particular policy rationale around $180,000? Now, it’s clear that it links to the top tax threshold. The top tax threshold is also $180,000. It’s an interesting point, because people earning over $180,000—and that is a substantial income in New Zealand—first of all, their tax rate increases after $180,000, and now they don’t get the KiwiSaver tax credit, either. I’m hoping it wasn’t just a convenience thing at $180,000, that there was actually some substantial fiscal analysis that said that, in actual fact, we think people earning over or roundabout that amount of money are likely to be able to save without needing that extra credit from the Government, that they would be in a position to do that anyway. So I’d just like to know, from the Minister of Revenue, what advice they got around that substantive change, around $180,000. That’s the first question I have to ask around that threshold change.

The other one around the threshold change is a very precise one. It just seems to me, from the way it’s written, that a person who earns $179,999 will get the member tax credit, but a person who earns $180,001 will not get the member tax credit. There’s just a little flex point there, where, in actual fact, you’re going to end up worse off earning a tiny bit more money than if you earned a tiny bit less money. Now, in other places in the income tax system, we try really hard to make sure that people do not end up worse off because of a tax change that pushes them up or over a threshold—an example of that is the minimum family tax credit. I just want to know what happens to people who sit right on that cusp, who, if they just get a tiny wage increase or a tiny salary increase, end up earning just a little too much to get the member tax credit. What was the thinking around that? Was there, again, any analysis done around that? I get we have to draw a line somewhere.

So the two questions: why was the line drawn there, and what happens to people who just fall on either side of that threshold?

Thank you so much, Madam Chair. My question is similar to what the Hon Dr Deborah Russell has mentioned as well. Again, we’re really appreciative, Madam Chair, of your clarity around this. I think, when we’re looking at the operative elements of this—I know we have voted on this. My question is around, in Part 1, tying into Part 2—because Part 2, in terms of KiwiSaver, sometimes we’re looking at the contribution rate adjustment and also the reduction rate; so it’s mainly the operationalisation of what the KiwiSaver will look like, from the employer and employee perspective.

But, I guess, the fundamental question we’re looking at in Part 1—although I think there is this narrative that we’re looking at making sure that more people are putting into KiwiSaver, etc., fundamentally we’re seeing that we are asking, if I am correct, New Zealanders to pay more out of their wages, which would affect people on the minimum wage as it is, in order that the Government isn’t going to be able to contribute as much, which is what we’re seeing in clause 13 of Part 1. Hence, we’re looking at increasing the contribution rate adjustment from a baseline 3 percent to a baseline 4 percent. I wanted to check with the Minister of Revenue: if the Government is really looking at wanting to ensure that New Zealanders can save up enough for their KiwiSaver, why has the Government considered reducing the Government contribution from $521.43 to $260.72, by half, and also, as a result of that, adjusting the threshold from a half to a quarter. That’s kind of my first question regarding some of the broader policy questions on the Government contribution element.

I also wanted to check, in terms of—let’s say, with Part 2, when we’re looking at clause 18—when we’re looking at the idea of this transition, in terms of the reduction rate going from 3 percent to 3.5 percent to 4 percent. Why was the increase going up to 4 percent? Why was 1 April 2026, as a figure, picked? Again, we’re looking at this sort of arbitrary—unless it’s a specific policy requirement or rationale that the Minister could highlight, it seems like an arbitrary date that has been put across, in terms of some of this.

So those are my two questions for the time being. Again, we’re kind of dancing back and forth between Parts 1 and 2 a little bit, but, in the broader scope of things, when we’re looking at the Government contribution changes, why has the Government decided to contribute less towards people’s KiwiSaver? Then, also, in terms of the rate reduction, as a starting point, why were those particular dates chosen to transition from 3 percent to 3.5 percent to 4 percent?

Thank you very much, Madam Chair. In answer to the questions regarding income thresholds relating to clauses 20 and 22, the income thresholds were considered. The Government decided that $180,000 was the appropriate level in which earners do not need additional Government support. The benefit and value for money in providing Government contributions to low and medium income earners under $180,000 was seen as the most targeted mechanism in order to achieve that.

In addition to that, research suggests that low to medium income earners need more support than higher-income earners as they have other forms of savings. So that is the policy rationale in regard to clauses 20 and 22 in regards to the income threshold.

The question raised in regard to people that sit above and below $180,000—it is no different to any other brightline number used in regard to taxation; there is a threshold and those above will be subject to it and those below will not.

In regard to clause 20, in regard to the question on the threshold increasing from 3 to 3.5 percent and the timing of that, the Government considered to ensure that there was appropriate time for both employers and employees to be prepared to increase those contributions and, hence, why the date—just under a year out from today—was considered appropriate. That was then balanced with the further increase over the period of the next three years—providing certainty to business is a key objective of this Government.

Thank you. Just a quick question on new Subpart 3B, “Rate reduction”, inserted by clause 23, which talks about “[may] be required be no less than 92 days and no more than 1 year.” I understand the philosophy around 92 days is probably around not having frivolous applications. Interesting number, 92, so keen to understand the rationale. Also, no more than a year—there seems to be an assumption that the circumstances will have changed or a pressure, if you like, to make it that the amount will change after that one year. I’m wondering what happens in the event that circumstances haven’t changed. Will they have to do a new application? Will they have to submit all the information that is required under new section 101L(2), or would they just be able to seek some kind of an extension? What is the policy reason for that? Thank you.

I just want to follow on from my colleague Ingrid Leary’s question. It’s not so much around the policy around that but I’m just thinking of the compliance costs that are associated with these rate reductions. Now, it’s interesting because a rate can be reduced from 4 percent to 3 percent—so a difference of 1 percent—in what a person contributes to KiwiSaver, and the implication is that that will help with the cost of living. It seems like a fairly small amount to be changing around there, but I get that some people may feel the need to do that. Particularly we’ve seen just reported in the news today that, in the last year or so, more people have been withdrawing KiwiSaver for hardship reasons than for housing reasons. But given that quite small economic benefit, what was the trade-off with compliance costs there? Part 2 has concerned itself very largely with that rate change, and it’s quite a complicated procedure. There’s quite a significant compliance cost for an individual to go through and get that rate reduction, so I wonder what thought was given to the trade-off there between compliance costs and the benefits to the individual.

But it’s not just the compliance costs either. It’s for the individual but also for the employer, so there’s a set of compliance costs there, but then there’s some work that must need to be done within Inland Revenue’s own systems to enable those changes to take place as well. So there’s a set of costs to the Government in terms of how it actually sets up the systems in order to accommodate this particular change in the rates. I’d just like to hear from the Minister of Revenue what consideration was given to those three sets of costs—compliance costs for the individual, compliance costs for the employer, compliance costs for Inland Revenue and Government systems—in that space.

Thank you, Madam Chair. I appreciate the call. I hope you can hear me from all the way back here. I’ve chosen to sit here because I have the theory that you’re more likely to get called when you’re in the Speaker’s line of sight.

But on to my questions. I have specific questions around the general, cumulative impact of the changes, some in Part 1, as the previous speakers have already articulated, and some in Part 2. My questions relate specifically to what the impacts of these changes might be on migrant communities. We know that migrants come here later on in their life, so won’t have had the opportunity to contribute to KiwiSaver as much as, for example, if someone was born in New Zealand, they were here all their lives, they would have been contributing to KiwiSaver from when they started working—I started working when I was 13 years old, I was a paper boy—so from 13 years old to, potentially, when they retire, to 65, some end up working longer than that. But we know that some migrants end up coming here later in their lives—for example, someone who comes here when they’re 30 or 35. So they would have had less opportunities to contribute to their KiwiSaver.

What are the impacts of having the contribution rate that the Government has set; will that have the potential to create disparities in terms of communities that are more likely to come from migrant backgrounds—for example, the Asian community? Acknowledging, of course, that just because you’re migrant doesn’t necessarily mean that you’re Asian, and vice versa. Some communities here are actually quite well-established from the Asian communities, and I’m thinking, for example, in Dunedin, some of the families there have been there since the era of Chinese goldmining, since the 1800s. We can’t necessarily equate the two, but we do know that there are likelihoods.

I also have questions about whether there’s been much engagement in terms of whether there was specific feedback from the Retirement Commission on the impact of these changes. I’m looking at a body of work that they did a few years ago, and it’s titled “Research highlights widespread disparities in the experiences Māori have in retirement.” This is a series of papers that they issued regarding the gaps in wealth between Māori and non-Māori, and how that might impact the potential for Māori in retirement. Paper one goes over the structural, historical, and political factors. Paper two is a literature review by Dr Margaret Kempton that acknowledges that, obviously, Māori are—

Can you come to the question, please, Francisco?

This is part of the question. Was there engagement in terms of the Retirement Commission, and were the four papers that the Retirement Commission did—in terms of research that highlights widespread disparities and experience Māori have in retirement—factored into the sort of analysis and the work that the department did in terms of estimating the broad impact of these changes? I’ll leave my contribution there. I might want to take some follow-up calls depending on how the Minister of Revenue answers, but thank you for the opportunity.

Thank you very much, members. In regards to answers to questions relating to the temporary rate reduction in regards to individuals being able to select, for a period of time, a reduction back to 3 percent—these are clauses 18,19, 23, 24, and 25; all of those clauses relate to the temporary rate reduction point—this is providing choice for employees, depending on their financial circumstances. They have a 92-day period, which is, in effect, three months, to be able to apply for that rate reduction; that would be based on their personal circumstances. They can reapply as many times as they wish in regards to that rate reduction. The process that will be involved is considered appropriate and is not overwhelming in the context of administration.

In regards to the questions around compliance and burden, IRD did consider the costs in the context of compliance. They also will be managing the administration costs of this through baselines. We did take on board feedback from the Retirement Commissioner, who also noted and has made statements in the context of the benefits of increased savings which will result as a result of this policy.

Lastly, to the question in regards to working parents, if I use a working-parent family with children as an example, under the status quo versus under this policy, a working parent, at the time at which they purchased a first home or used the KiwiSaver for a first-home deposit, would have 9 percent more savings, from $15,800 to $17,281. At retirement age, a working-parent family will have 26 percent more savings, from $397,000 for the household to $500,000. These changes will drive a significant uplift in benefits for New Zealanders in the context of retirement and also in regards to their KiwiSaver balances, which they can use to buy their first home.

Thank you. Mōrena, Madam Chair; thank you. I think I heard a comment earlier around tax and this whole debate this morning and how it can—it does leave me a bit cold in reality, but, in fact, unfortunately, in this context, it’ll probably leave too many Māori families out in the cold. So I want to start my discussion in that way.

Minister, if you can—and it’s a little bit, I think, in the previous part, but I’ll land with this section now, regarding Adrian Rurawhe’s discussion earlier. Has the Government considered the cumulative impact of the changes alongside rising living costs, housing pressures, and other benefit changes affecting low-income and Māori whānau?

I live in the community up in Te Tai Tokerau—that is, Northland—and, like many of my colleagues, rural Māori communities, and urban communities, actually, are of a particular interest to me—all families are, actually. So this is the context of my questions. What assessment was made of how this policy affects equity outcomes? Will the Minister of Revenue release the full cost-benefit analysis or distributional impact modelling used to inform this policy change? And how does the Minister justify a faster reduction in support for struggling families?

There’s a phrase up in the Far North—we talk about “Living in poverty in paradise”; sadly, too many are forced and struggling in this thing called a “poverty reality”, Minister. I don’t see them in these ideas which are now policy and now will be made law, sadly. What protections of transitional measures are in place to ensure families don’t suddenly lose crucial financial support? How will the Government monitor and evaluate the impact?

Now, I’m going to come to clause 18—if I may—which amends section 4, by inserting the definition of “rate reduction”. This allows for a formal process where individuals can temporarily lower their contribution rate due to financial need in clause 19, which amends section 22 to insert section (22)(1)(c)(ia) on the evidence of rate reduction needed for new employees. How will these amendments ensure that Māori participation and retention in KiwiSaver are not adversely affected? Has an impact assessment—an actual impact assessment—been done specifically on and with whānau Māori regarding these amendments? What measures are in place to monitor if these legislative changes disproportionately disadvantage—and they will—Māori whānau? What mechanisms, Minister, if you can answer, does the Government have in place to remove barriers to applying for rate reductions? Minister, it is difficult for Māori to engage with these processes in plain language, whether the language is—well, more often than not, it’s English, and it’s not Māori enough, sadly. And how is Government going to mitigate these issues for Māori communities?

These are real and actual issues for whānau Māori in rural communities and urban communities. Many of the processes, the clinical, technical processes that you’re forced down into a lane, Minister, are already alienating and they are difficult to navigate. When processes like this are that difficult, the end result will always be either frustration, anger, or just basically giving up and doing-what-you-need-to-do - type of processes, Minister. So I am really interested and keen. I hope that you can give some genuine thought to these questions, these places that I’m talking about, particularly our Māori places and people, and that they are understood in some of your responses. Thank you, Madam Chair.

Thank you very much, Madam Chair. Just in regard to the last two questions, as we know, a large proportion of youth in New Zealand are Māori and Pasifika, and, as a direct result of this Government’s changes in the context of KiwiSaver changes related this clause, allowing 16- and 17-year-olds to be eligible for KiwiSaver, a large proportion of youth who are Māori and Pasifika will now be more better off in the context of KiwiSaver than they were under the status quo, and that should be celebrated.

The IRD provides its services in multiple languages, including in print and by phone, and including, obviously, Māori and other languages. If any individual in New Zealand is not fluent in English, then they can call the IRD on 0800 700 342.

Thank you, Madam Chair. In the spirit of back and forth with the Minister of Revenue, I’d just like to acknowledge that he has put on the record, in Hansard, the ability for people to apply as many times as they would like for what is, essentially, a kind of hardship allowance to be able to go to the 3 percent. I guess my points would be picking up on the previous speaker: the ability for those who need that 3 percent—because of cost of living pressures—is likely to be less than for those who are in higher income brackets. So I wonder if the Minister would consider, perhaps, whether a reapplication process could be put in place or whether he would be prepared to put in the Hansard that there would be no jeopardy for those people, that every application would be considered either as a starting point so that the commissioner would not look back and go, “Well, you’ve already applied 10 times, and, therefore, we’re going to get hard on you.” If the circumstances have not changed, then they have not changed, and, perhaps, there could be a process that just enables that access, because, currently, as has been pointed out, there is a difficulty with access.

The other point I would like to go into is just around the refund if the person cannot apply—in new Subpart 3B, new section 101T. It’s really interesting language here where it says, “The employer … may refund the amount” to the person, and then, again, in new subsection (6), it says, “The Commissioner may refund the amount determined under subsection (2) … if the money is held by the Commissioner.” To some extent, I understand the new subsection (6) more because it would seem that a discretion like that for a commissioner is probably appropriate. But I would like to understand, still, in that subsection, why the commissioner “must not”. For subsection (2), I think very different principles apply, because here the legislation is giving the employer a kind of discretion around refunding moneys to people who cannot comply, and there is a clear set-out formula in the legislation about “contributions deducted - rate reduction amount.” I don’t understand why this legislation would create this kind of discretion, which just makes it even more difficult for the employee to be able to get moneys if they cannot comply. It also puts a bit of an unfair pressure on the employer, who now becomes judge and juror of the situation. To my mind, it would be better, really, if the moneys either had to go back to the employee or had to go to the commissioner, who would then apply that discretion. The employer is not an agent of the State, and it is putting an unfair burden, in my view, on the employee but also on the employer to have to make those decisions.

So, really, the wording, Minister—I haven’t got a formal amendment to this, as far as I’m aware, but would the Minister consider making it that the employer must give that refund, or would the Minister consider striking that out and replacing it with something that requires those moneys to go to the commissioner, who would then apply that appropriate discretion? Although, even then, the way the legislation is meant to be operating, if I understand it, really the commissioner should be giving that money back to the person who cannot comply.

Thank you, Madam Chair. Look, I’ve just got a question regarding new section 15B, “Rate reduction”, inserted by clause 26. It’s good that, obviously, Kiwis will have a choice to opt back or down. That’s quite good for us on this side of the House; we’re all about personal responsibility. I just wonder if the Minister of Revenue is satisfied with the way it’s worded in new section 101L(3), inserted by clause 23, “For the purposes of subsection (2)(c), the period for which the rate reduction is required must be no less than 92 days [before] and no more than 1 year.” I just want to check that the Minister’s happy with the way that’s landed in legislation.

As we’re just about at the end of Part 2—just at the very end—I’ve just got a question for clarification from the Minister. This is replacement section 80KB, “Section 80KB amended (Contents of application)”, inserted by clause 29. For reference, it’s on page 16 of the bill. Again, I’m just seeking clarification from the Minister on clause 29(1): “In section 80KB(1)(c), in the words before the subparagraphs, replace ‘on the last day of the tax year’ with ‘on the last day of the tax year and that tax year is before the 2026-27 tax year’.” Also, clause 29(3)—just at the bottom of page 16, just for your reference, Madam Chair, and Minister—“In section 80KB(1)(g), replace ‘on the last day of the tax year’ with ‘on the last day of the tax year and that tax year is before the 2026-27 tax year’.” Similarly, it goes on in replacement section 80KV, inserted by clause 30, which actually brings us right to the end of the whole bill and part. Just before we go to deliberation, I just really was after some clarification from the Minister, and we’d really appreciate his response on that. Thank you.

Cunning plan, Mr Hamilton, but we’re not there yet.

Thank you, Madam Chair, and I am—

Good try!

Yeah, good try—trying to jump right ahead to the end. I am wanting to ask follow-up questions to the Minister of Revenue’s response to the questions from Mariameno Kapa-Kingi, and, in particular, around the impact that these changes will have on Māori. The point that the Minister made was the inclusion of 16- and 17-year-olds and the number of Māori who make up that group.

But what I want to ask the Minister is: what does he say to the Retirement Commissioner, Jane Wrightson, who said that low-income earners, Māori, women, and self-employed people would be the hardest hit by the reduction of the member tax credit? What impact can the Minister tell us that these changes will have, in particular, for Māori?

I’ve already provided an answer in regards to that question, so I won’t repeat myself.

In regards to the question on the rate reduction, I want to confirm that the process will be an automatic approval and there is no hardship criteria in regard to taxpayers that are seeking a rate reduction. The protocol in regards to the timeline for a rate reduction is also consistent with existing savings suspension protocol under KiwiSaver, and that therefore ensures that compliance costs are saved.

I want to answer the question by the member Ryan Hamilton in regards to section 29. Just to clarify, this provides for different dates of birth for individuals and the drafting of the rates reduction. They all follow standard processes for saving suspension, so I hope that clarifies the questions asked in regards to all of clause 29.

Thank you, Madam Chair. I want to pick up on something the Minister of Revenue said before, and, again, it comes back to 16- and 17-year-olds being eligible for KiwiSaver. I think, from what we’re hearing and what the Minister has said, it is a good idea. But one of the things that one of the previous speakers picked up on, and this is a different perspective of that—he was talking about KiwiSaver in the context of the Government’s attendance package. However, one of the things we have found, particularly during the pandemic and due to the cost of living crisis post-pandemic—and this, again, follows on from Mariameno Kapa-Kingi’s question around Māori and Pasifika and also rural families’ perspective—is that we do see 16- and 17-year-olds, or potentially younger, having to leave school, or who are no longer able to attend school, because of the fact that they have to work to support their families.

Although 16- and 17-year-olds being eligible for KiwiSaver is a good idea, I wondered if the Minister had any advice around the fact of whether this will have, I guess, an adverse response in the sense that we’re then going to be seeing more and more people who will leave school early, or more and more people who are not even leaving school but are simply not attending school because then they would need to go and work, because now they have this new incentive, which is that their salary will be contributing towards their KiwiSaver. So that’s one of my first questions to the Minister.

But picking up on what the member opposite was talking about in terms of people being able to opt out of the rate reduction, I wanted to check with the Minister on what the rationale was behind allowing people to only do it for one year and having to reapply for it every single year. Now, yes, I agree that having people being able to opt out is a good idea, but people who are probably doing that are already working two, three, or sometimes four jobs. They’re working 60 to 80 hours a week, and yet now we’re adding on this additional administrative burden for them that they have to now do it every single year, or opt in every single year and reapply and go through all of the process. As we have seen with the saga that is FamilyBoost, people don’t necessarily have the time to do that, and IRD is not the most user-friendly department in terms of application process. So when they do something like this—and you’re asking people to do it once every year—would that then put, unfortunately, undue burden on people having to do that?

I wonder if the Minister would consider my amendment, which is that people then do this to opt out, and they are opted out for as long as they want to until they are happy to opt back into the system again—and it would increase their rate reduction to go back up to 4 percent as opposed to 3 percent—as opposed to having to do it on an annual basis.

I know there are some other questions that other people have asked in terms of 90 days, but I’ll leave that to the Minister. But those are my two questions on whether there’s been any advice the Minister has received around the adverse effect of 16- and 17-year-olds no longer attending school because they’ve now got this additional incentive of being opted into KiwiSaver, and also whether the Minister will consider my amendments in terms of the rate reduction opt-out to be longer than one year.

Well, thank you very much, Mr Chair. Well, firstly, I’m disappointed that members of the Opposition, particularly the Greens, are voting against this legislation, voting against 16- and 17-year-old New Zealanders to be eligible for KiwiSaver. I don’t think that that sends a very positive signal, but I do acknowledge Government for taking a step—about 85,000 young people will now benefit from KiwiSaver, something that you are opposing.

In the context of the points around section 102 of the KiwiSaver Act 2006, the ability to take a savings reduction—in the context that this provides members with choice, and the context around the 12-month element ensures that we want to be able to boost members’ ability to save in KiwiSaver and, therefore, the need to have to reapply does provide an opportunity to reconsider one’s position and whether they want to continue to invest or not.

Thank you, Mr Chairman. I have a question for the Minister of Revenue around clause 23, which is also on the rate reduction section, where this is specified. My colleague from the Green Party has asked about whether there was any consideration of not having to reapply every year. But my question for the Minister is about whether any modelling has been done around the need to reapply every year to qualify for a lower rate of, say, 3 percent, and whether or not this is going to disincentivise people being involved in KiwiSaver at all—whether it will mean they stop their contributions and they aren’t participating in the scheme, and whether the Minister received any advice around withdrawal from KiwiSaver because of the administrative burden, and what the distributional impacts of that would be.

You can see that the Opposition parties have an issue with the compliance burden and, also, just the restrictive nature of new Subpart 3B, inserted by clause 23. I’m wondering, if we look at new section 101M, “Grant of rate reduction”, where the commissioner must give the rate reduction for the period specified, if it has been applied in that way.

If we look separately at new section 101N, the “Commissioner must give notice of grant of rate reduction”—under (a)(ii)—“of the date on which the rate reduction will end”. As it is written, and without clarification, it does appear that there could be a discretion for the commissioner to actually give that reduction for a period longer. It is only the previous section that requires it to be for the period which was applied for. I’m wondering if the Minister could clarify whether, in his view, that might be a way that the commissioner, with his or her discretion, would be able to actually overcome these issues of equity that are going to impact Māori, women, and so on, or would he amend new section 101N to clarify the restrictive nature of that section, if he believes that it must be pegged to new section 101M, the previous section before it?

Possibly I missed the answer—or maybe I didn’t put the question, so here it goes again. Can the Minister of Revenue explain, please—no, let me just go back to clause 17 and KiwiSaver and how it seems that the Minister thinks we don’t get that. We get that. I’m interested, therefore, to know the actual numbers of young Māori 16- and 17-year-olds in KiwiSaver. What are those numbers? I’d be interested to know if the Minister knows those. That would be helpful for me to be able to get a better picture on that. Has an impact assessment been done specifically on Māori whānau regarding these particular amendments?

All measures have a direct impact on whānau Māori when systems often alienate. So, with that in mind, what measures are in place to monitor these changes disproportionately disadvantaging Māori? I might have said something similar in a previous question, Minister, but I didn’t hear the answer clearly enough, possibly. Also, what mechanisms does the Government have in place to remove the barriers to applying these rate reductions?

You might have heard me mention the other day this thing called “DWB”—driving while brown. It’s very much in the 16- to 20-year-old Māori young people band. So when you’re driving while brown and you get stopped, when you’re profiled and lots of photos are taken—sorry, I don’t mean to cause the Minister’s face to change quite like that, but that is the context, and unless you understand it, the ideas that come out of the mind that produces this are simply going to fail. So I am doing my best to assist the Minister by asking these really useful questions, and I’m looking forward to reciprocal responses.

It is difficult to engage with these systems—I’ve said that, and I hope that’s understood. How, Minister, will you mitigate these issues for Māori communities in a Māori way? I appreciate the responses.

Thank you, Mr Chair. I’m just looking at clause 25 of the bill. That clause deals with non-compliance of financial institutions with the Financial Markets Conduct Act and financial markets legislation and the Fair Trading Act. As I understand it, and the Minister can correct me if I’m wrong, this is to allow for the fact that there is this raft of changes to KiwiSaver contribution rates, what have you, and Government contributions, and there will be material out there—disclosure statements, advertisements, fliers, what have you—and it will say things like if you contribute a thousand and something dollars, you will get the Government contribution of $500, and that’s no longer accurate.

So I get that, but I guess one of the questions I have—or the real question—is that new section 244(b) says that “the non-compliance relates to a product disclosure statement or other disclosure document, … and does not continue on or after 1 January 2026.” So we’re here in May, and it appears that these documents are, by definition, misleading. These are critical documents to the financial decision-making of New Zealanders. This provision says, in essence, up until 1 January next year, you can give people misleading information about investment decisions.

Now, I can understand a short period of grace, because of the way this is done, but the fact is that they’re $66,000 worse off over their careers as a result of this reduction in the Government contribution, and that’s not being put to them. In fact, the opposite is being put to them: that they’re being presented with a disclosure document or going online and clicking on the disclosure document and going, “Oh, goody! The Government will give me $500 a year.”, and it hasn’t been changed.

Now, I guess the question is this: have I got that right, and why is it not that best endeavours must be used, and why is the period so long? If it’s a website—an electronic document—it could be edited within days or weeks, and yet there’s over six months when this information can be in the public domain, and that’s how most disclosure happens nowadays, electronically. The days of having boxes of prospectuses and disclosure statements are well past us, and I accept that there are going to be some fliers and some leaflets, and, in fact, they should be shredded. The short answer is that they should be shredded because they’re no longer accurate; they’re, in fact, misleading. I wouldn’t want to hold the financial institutions liable if in some office, in the back corner, someone forgets to shred them and one accidentally gets out, but what this does is it says, “You don’t need to do anything for over six months.” So it’s really quite problematic.

Now, I’m hoping that good financial institutions, to comply with their Financial Markets (Conduct of Institutions) Act obligations, will immediately inform their investors and potential clients that these changes are being made and that the long-term contributions of the Government will fall and that there’s a different contribution framework for employer and employee contributions going forward. But the suggestion that there’s no need to amend those disclosures—whether those new provisions come into force immediately or not, the fact is that KiwiSaver is a long-term investment strategy and the rules appertaining to their entire investment—the Government contributions across the life of it, the employer contributions across the life of it, and so on—are needed. So I’d be very interested indeed if the Minister could elucidate that. Thank you, Minister.

Thank you very much to the member the Hon Dr Duncan Webb for the question in regard to clause 25. I can assure the member that the time period provided is consistent with the usual period for KiwiSaver changes. The Financial Markets Authority was consulted in the context of this change and confirmed that it was a suitable period. And it is acknowledged in clause 25 that we are looking to provide a limited protection for non-compliance with financial markets legislation, acknowledging that some of these changes relate to changes in product disclosure statements under the Financial Markets Conduct Act 2013 and that they will have until the date noted. It is sufficient time in order to make those changes.

In regards to the questions regarding clause 23, new Subpart 3B, new section 101M and 101N, the Inland Revenue has no discretion on changing those; those statements are consistent with other aspects of legislation.

In regards to the questions from Te Pāti Māori, I will not repeat answers that I’ve already given to questions, and I didn’t have any clause numbers to be able to give any specifics.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 18, section 4(1), to replace “1 April 2026” with “1 April 2028”, be agreed to.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 19, section 22(1)(c)(ia), to delete “give or”, be agreed to.

Dr Lawrence Xu-Nan’s tabled amendment to clause 20 to insert subclause (5) is out of order as being outside the scope of the bill.

The question is that Arena Williams’ tabled amendment to clause 23, to delete new section 101L, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 23, to delete new section 101M, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 23, to delete new section 101N, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 23, to delete new section 101O, be agreed to.

The question is that Dr Lawrence Xu-Nan’s tabled amendment to clause 23, new section 101P, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 23, to delete new section 101P, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 23, to delete new section 101Q, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 23, to delete new section 101R, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 23, to delete new section 101S, be agreed to.

The question is that Arena Williams’ tabled amendment to clause 23, to delete new section 101T, be agreed to.