Salesa Jenny; Henare PeeniTUESDAY 23 MARCH 2021(continued on Wednesday 24 March 2021)TAXATION (ANNUAL RATES FOR 2020-21 FEASIBILITY EXPENDITURE AND REMEDIAL MATTERS) BILLThird ReadingASSISTANT SPEAKER (Hon Jenny Salesa): Members the House is resumed. We now move to the third reading of the Taxation (Annual Rates for 2020-21 Feasibility Expenditure and Remedial Matters) Bill.Hon PEENI HENARE (Associate Minister of Housing) (Māori Housing)) on behalf of the Minister of Revenue: I move That the Taxation (Annual Rates for 2020-21 Feasibility Expenditure and Remedial Matters) Bill be now read a third time.This bill was introduced in June 2020 in the immediate aftermath of the national COVID-19 level 4 lockdown and the economic landscape has shifted significantly over that time. The Government has had to respond at pace. Since the introduction of this bill there have been numerous response measures to the pandemic and measures to support businesses and workers. This resulted in the Supplementary Order Paper to this bill released in June of last year among other changes to increase the automatic tax write-off threshold from $50 to $200 for the 2020 tax year to help ease the financial stress caused by COVID-19.A second Supplementary Order Paper was released and this too contained response measures by the Government to address significant issues. Along with further economic recovery measures to promote growth and measures to protect the integrity of the tax system the Government has already announced the most significant new measure added to the bill: the further extension of the brightline test. This is a response to a housing situation which has been with us for some time but which has since the advent of COVID-19 gathered significant steam. The housing issue is now a serious problem both for would-be homeowners and for the economy. The International Monetary Fund (IMF) has recently pointed out that our ballooning housing market could trigger a pronounced correction. The IMF went on to say that mitigating near-term housing demand particularly from investors would help moderate price pressures. We must take steps to protect our rebounding economy from future shocks. A housing market correction would threaten our recovery. We are not introducing a capital gains tax; we are expanding the brightline test. The brightline test as members are aware makes residential property other than the family home or inherited property taxable when the property is sold. The current period of the brightline test is five years which was extended from the original two years. But research suggests that this is still not enough. The median ownership period of property in New Zealand is typically around seven to eight years. That means that the gains on the sale of most residential investment property are escaping taxation and the tax advantage gives property investors an incentive to invest in housing over other types of assets. This is unfair as it means that unlike other forms of investment income it escapes taxation and distorts investment away from more productive investments. Extending the brightline test to 10 years will help to ensure that people investing in property pay tax on their gains on investment. The extension to 10 years will generally apply to property acquired on or after 27 March 2021. Residential property purchased before the application date will continue to be subject to the five-year brightline period. This move will help property investors out of the market into more productive areas of the economy make the tax system fairer and at the same time will make homes more affordable. However that is not the sum total of the Government's response. Tax is neither the cause nor the solution to New Zealand's longstanding housing problem. But it can help. This proposal is therefore part of a suite of measures to achieve the Government's housing affordability objectives. I turn now to the other measures added to this particular bill. The first of these is to support business by introducing a new business continuity test for the carry-forward of tax losses as long as there is no major change in the business activities of the company taking into account the asset used by the company to generate income. Kiwi businesses are hungry for capital as they strive to get ahead. But one problem they face especially start-ups is that they cannot access previous losses if they fall foul of our current loss continuity rules. Our current rules were designed as integrity measures to prevent avoidance through lost trading but we think they are unnecessarily strict and are hobbling growth. So we are proposing to loosen those rules while still upholding the integrity of our tax system. Another new item addresses an issue where the tax rules have become an obstacle to businesses wishing to donate goods for charitable purposes. This became apparent as businesses which began to respond to COVID-19 by donating trading stock found that they were liable for the tax on the disposal of that stock. This is a disincentive for charitable giving—for example a hand sanitiser business is liable for tax if it donates some of its products to a hospital or a clothing retailer is liable for tax if it donates clothes to a city mission or a farmer is liable for tax if they donate animals to a food bank. This is obviously not the outcome we want in this COVID environment so we are proposing an immediate but temporary solution which will apply to donations of trading stock made on or after 17 March 2020 and before 17 March 2022. Finally a significant measure will allow Mycoplasma bovis - affected farmers to reconsider previous income equalisation deposits if they retrospectively elect to use the new income spread rules and certain conditions are met. There are also a number of remedial and technical amendments to improve the administration of unclaimed money support the introduction of a new 39 percent tax rate and disclosure requirements for certain trusts. In conclusion the measures that I have discussed are truly important for Aotearoa New Zealand. In different ways they will contribute to a fairer tax system and support our economic recovery. They join the other measures in this bill which will have similar aims. I and this side of the House are proud of this bill and it gives me great pleasure to commend this bill to the House.