Bayly Andrew: Taxation (Bright-line Test for Residential Land) Bill — Third ReadingText is incorporated into the Bound VolumeBayly Andrew: Taxation (Bright-line Test for Residential Land) Bill — Third Reading[Sitting date: 12 November 2015. Volume:710;Page:8012. Text is incorporated into the Bound Volume.]ANDREW BAYLY (National—Hunua): It is a pleasure to be talking on this third reading of the Taxation (Bright-line Test for Residential Land) Bill. Particularly after the previous speaker Stuart Nash I was getting so worried. I was getting so confused with what he was saying and then he says at the end that he supports it so I am just glad that he has got it clear in his own mind.This is a Government trying to deal with an issue of market failure and of course the Opposition always wants to claim that market failure is due to the Government. Well it is not. What we have had is an issue through the global financial crisis where houses were not being built and consequently there has been a shortfall in the number of houses simply because developers were not prepared to take the risk.What I do know is that this Government is now actively trying to deal with this market failure. The case in point is the 104 special housing areas that are now in place in Auckland.Stuart Nash: Andrew you’re being disingenuous.ANDREW BAYLY: I can tell you within my own electorate of Hunua—and you should stay and listen to this bit—The ASSISTANT SPEAKER (Hon Trevor Mallard): Order!ANDREW BAYLY: Sorry. Excuse me Mr Assistant Speaker. In my own electorate of Hunua from my own assessment of all the developments I know are coming to the market over the next 6 years there will be 13000 new homes built in the next 6 years. That is a substantial number of houses representing roughly about 30000 people moving into my electorate.What this bill does is amend the Income Tax Act 2007 by inserting a new clause that requires property owners and investors to pay income tax on any property that they sell within a 2-year period. Most people seem to get very confused about this. This is an income tax which is exactly the same as you would pay if you were buying and selling shares on the stock market. If you are deemed to be a trader you pay income tax just as this bill is seeking to apply to those trading in houses.The 2-year rule is slightly different. In the normal course of events it applies from the date of registration or the acquisition date of the land through to the date that that property is sold. There is a slight amendment for apartments where the initial date of the 2-year period applies when entering into an agreement to buy the property and that is an important little distinction that has been applied. Also it is very clear that this applies only to residential land. If it is the case that you have a corner store that has a residential property at the back only if more than 50 percent of the building is deemed to be occupied for the purposes of business would it be excluded from this legislation.So what this bill also does is make three very clear exemptions. The first one is if you are buying and selling a property within 2 years and it is your normal house of residence—and that of course applies to most transactions in the country. That exclusion is one that all New Zealanders can rely on—i.e. if they buy and sell their house and they live in it they will be excluded from this full stop. The second exclusion is if you are selling a property within 2 years of having a matrimonial dispute and the third is if you inherit some property.I think the most important thing about this bill—and this is the bit that the Opposition certainly has not talked about today—is that it should be seen in the context of a number of new initiatives that this Government and the Reserve Bank have brought into force. So just dealing with the latter we are all aware that the deposit rate the loan-to-value ratio that the Reserve Bank has applied to the Auckland market has moved to a rate of 30 percent.This is a heavy requirement on banks to make sure that they are not lending extraordinary amounts of money to people and to make sure that the deposit rate that people have to have before they can enter into funding agreements with banks is at a suitable level. That already is showing some benefit. The Reserve Bank Governor at the Finance and Expenditure Committee was remarking on it yesterday—that we are now seeing a flattening off of property prices in Auckland.But the second thing is in terms of the legislation that this Government has already passed we passed the Taxation (Land Information and Offshore Persons Information) Bill. This is the legislation that dealt with the question of requiring investors to make sure they get a bank account and an IRD number.On that note I think this is a very comprehensive bill. We are going to see another piece of legislation next year dealing with resident withholding tax. In that context I commend it to the House and I am happy to support it.