Nash StuartTAXATION (KIWISAVER STUDENT LOANS AND REMEDIAL MATTERS) BILLThird ReadingHon STUART NASH (Minister of Revenue): I move That the Taxation (KiwiSaver Student Loans and Remedial Matters) Bill be now read a third time. The Government's objective for the tax system is for it to be as fair as possible. We think that the system should treat taxpayers fairly so that different taxpayers with similar amounts of income pay similar amounts of tax. We want the system to act neutrally regarding economic activity. In raising revenue the tax system must seek to minimise compliance costs. It's also fair that people pay tax at the rate intended under our progressive income tax structure. These are worthy aims. The proposals in this bill are guided by and aim to achieve these goals.Members will be aware of the simplification programme being run at Inland Revenue (IR). That programme will go a long way towards improving fairness by helping make the system easier to use and understand. At the same time while the hood is up so to speak on IR's technology system the bill provides an opportunity to introduce changes to address longstanding problems awaiting the advent of better technology. Already most of IR's services and functions have been transitioned to a new simpler set of procedures allowing a greater level of self-management and greater control and generally better outcomes. Next month it will be the turn of KiwiSaver and student loans.The main feature of the KiwiSaver proposals in this bill are: one a proposal to improve the speed that employer contributions are paid to scheme providers by allowing Inland Revenue to pass KiwiSaver employer contribution amounts to scheme providers based on pay-day filing information; two changes that ensure Inland Revenue pays interest on employer and employee contributions from the employer's pay day until the contribution is afforded to the member's scheme provider; three reducing the KiwiSaver provisional period and holding period meaning that new KiwiSaver members' contributions will be with their scheme provider sooner; four reducing the time frame for the transfer of members' information and funds between providers; five removing the three-month grace period for people invalidly enrolled in KiwiSaver to gain residency; and six requiring employers to provide information to Inland Revenue on the employees' income to help ensure employers are deducting members' contributions at the right rate.The bill also proposes that people with life-shortening conditions such as for example Down syndrome should be able to withdraw their KiwiSaver funds before the age of 65.This bill also deals with an issue related to KiwiSaver—the prescribed investor rate. When investors are on an incorrect prescribed investor rate or PIR either too much or too little tax can be paid. When too much tax has been paid there is no legislative provision that exists allowing the overpayment to be refunded. The bill addresses this issue by allowing automated refunds of overpaid tax through the simple and efficient means of a square-up process.Student loan changes: the main proposals relating to student loans are providing certainty to borrowers by limiting the situations where changes would be made to a borrower's payment obligations prior to 1 April 2013; renaming the student loan repayment holiday to temporary repayment suspension" to reinforce that repayment obligations have simply been suspended; allowing employers to be notified of an employee's loan balance when their student loan is close to being fully repaid—this will reduce the chance of overpayments for borrowers who are close to repaying their loan; and treating overseas-based borrowers who are unable to meet their repayment obligations as a result of serious illness or disabilities as physically in New Zealand so that their loans will not be subject to interest.Research and development: the third main component of this bill relates to R & D tax credits. The main proposals in this bill relating to this are making R & D tax credits more broadly refundable with a cap based on labour-related taxes paid by the firm each year; excluding entities that derive mostly tax-exempt income from the research and development tax credit regime as they already derive significant benefits from the tax system; changing the in-year approval regimes to provide more certainty for taxpayers undertaking R & D that their activities will be eligible for the credit; and smaller amendments designed to clarify aspects of the regime to improve its sustainability and make things simpler for customers.Other matters contained in the bill include three changes to employee share scheme rules. The bill proposes to extend the definition of "market value" for these rules so that employers can more easily value the shares they give to employees under the share scheme.The two other changes relate specifically to exempt employee share schemes—schemes which allow the employer to grant the employee some shares tax-free. Under these rules the employee normally has to hold the shares for three years before disposing of them or else they become taxable again. But the bill proposes that if the employee has their shares bought back from them during that time in a takeover or other corporate reorganisation—an event which is obviously outside of their control—the shares won't become taxable.The last proposal gives employees the flexibility to let an employee keep their tax-free shares if they leave employment voluntarily which is not possible under the current rules. This better aligns the New Zealand employee share scheme rules with the Australian rules which is a boon for trans-Tasman companies offering share schemes.A longstanding area of uncertainty for taxpayers in relation to donation tax credits and gift deductions has been the treatment of debt forgiveness. The bill proposes to clarify that gifts made by the way of debt forgiveness will not qualify for donation tax credits or deductions. The proposal ensures that donation tax credits and gift deductions are limited to gifts of cash or repayments made by methods such as bank transfers credit cards or cheques.To continue with the theme of charitable giving the bill proposes updating the list of donee organisations in schedule 32 of the Income Tax Act 2007 to include a number of charities from the 2019/20 income tax year including the renaming of the Medicine Mondiale charity to the Sir Ray Avery Foundation. The bill contains a number of minor remedial changes to improve clarity.In conclusion these are the main features of this bill. In bringing this bill to the third reading I would like to thank the Finance and Expenditure Committee for their work on the bill and their valuable contributions especially the chair who did a fantastic job with this bill as well. Thank you very much. I would also want to thank the policy officials and drafters for their work—first class as always. I commend this bill to the House."