Goodhew Jo: Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill — Second ReadingText is subject to correctionGoodhew Jo: Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill — Second Reading[Sitting date: 05 December 2013. Volume:695;Page:15318. Text is subject to correction.]Hon JO GOODHEW (Minister for the Community and Voluntary Sector) on behalf of theMinister of Revenue: I moveThat the Taxation (Annual Rates ForeignSuperannuation and Remedial Matters) Bill be now read a second time. Ours is a good tax system governed by good tax rules. It is good because it strives always to ensure fairness. The system also aims to ensure that taxpayers understand their obligations and that those obligations are simple and not unduly onerous as that ensures a greater rate of compliance. The bill before us aims to make the rules for taxing foreign superannuation simpler and fairer for New Zealanders returning after working overseas and for migrants who have contributed to overseas superannuation schemes before coming to New Zealand.The current rules for taxing New Zealand residents on their foreign superannuation are complex and can be difficult to understand. Under the proposed changes from 1 April 2014 lump sums from foreign superannuation schemes will be taxed only when they are withdrawn or transferred to a New Zealand or Australian scheme. The tax would depend on the gains made while the person has been a New Zealand resident using one of two calculation options. Not being taxed on accrual under the foreign investment fund rules is a major simplification. The taxation of periodic pensions will stay the same.Transitional and practical matters arising from the proposed new rules are dealt with in the bill so that taxpayers will not be disadvantaged. These include making it easier to meet tax obligations by allowing those transferring their foreign superannuation scheme interests into KiwiSaver to make a withdrawal from the KiwiSaver scheme to pay their tax bill and by allowing people who complied with their tax obligations using the foreign investment fund rules before 20 May 2013 to continue using these rules in relation to that interest after 1 April 2014 when the new rules are proposed to come into effect.Those who made a lump sum withdrawal or a transfer to another superannuation scheme between 1 January 2000 and 31 March 2014 but failed to meet their tax obligations at the time will have the option to pay tax on 15 percent of the lump sum amount. Alternatively the individual could apply the rules that applied to their interest at the time of transfer and pay any associated back-tax. The 15 percent option would not impose any new tax liability beyond the existing law. I must stress that this is an option.These measures are designed to help people comply. The Government is simply keen to help people who may have been unsure of their tax obligations to get back on track. The Finance and Expenditure Committee has supported these proposals and made several recommendations. In particular the Finance and Expenditure Committee recommended that the rules be limited to taxpayers who acquired their foreign superannuation while they were not New Zealand residents. This will make the new rules more robust and is more consistent with the original policy intention.Other changes will make the rules easier for taxpayers to use. I said before that the tax system aims to ensure fairness. I would like to draw members’ attention to another notable feature of this bill which is the proposal to rationalise the rules as they apply to the taxation of miners of specified minerals such as gold and silver and also iron sands. Such miners currently enjoy a highly concessionary tax treatment. Mining is an important component of our economy but that does not mean that any one industry should be advantaged over others in tax. At the same time we acknowledge that the industry does have its unique aspects which must be taken into account.The bill therefore proposes a range of measures including that immediate tax deductions for prospecting and exploration expenditure will continue. However on the establishment of an operational mine exploration expenditure on items used for the extraction of minerals will be clawed back and be deductible over the life of the mine. Tax deductions for development expenditure will be deferred and allowed over the lifeof the mine. Expenditure incurred in the extraction of minerals will be subject to ordinary capital/revenue tax rules. So-called revenue account treatment will apply to land acquired for specified mineral mining—that is sale proceeds will be taxable and the cost of acquiring and disposing of the land will be deductible. General tax depreciation rules will apply to expenditure on assets with a useful life independent of the life of the mine.The bill also contains a number of amendments to ensure that the income tax rules cater for the rebuilding activity now taking place in Canterbury. I would like to thank the members of the Finance and Expenditure Committee for their valuable recommendations on this bill which have helped to improve and clarify the rules. It is therefore with pleasure that I commend the Taxation (Annual Rates Foreign Superannuation and Remedial Matters) Bill to the House.