Twyford Phil: Taxation (Bright-line Test for Residential Land) Bill — In CommitteeText is incorporated into the Bound VolumeTwyford Phil: Taxation (Bright-line Test for Residential Land) Bill — In Committee[Sitting date: 10 November 2015. Volume:710;Page:7844. Text is incorporated into the Bound Volume.]PHIL TWYFORD (Labour—Te Atatū): Because of the rushed and truncated time frame for this bill and the fact that it is going to be retrospective we are in the unusual situation of being here at the Committee stage of the bill with the bill basically having been in operation for the past month.When Quotable Value released its October data last week it was quite extraordinary because it basically gave us a snapshot of whether or not the bill has had any effect. Of course the effectiveness of the bill is one of the things that we are debating here and is one of the things that almost all of the submitters at the Finance and Expenditure Committee put a big question mark on over the bill. What we saw when the numbers came out last week was that prices in Auckland rose by $21500 in the month of October and hit a new high of $918000 for the average price. So you have to wonder whether or not this bill in all its glory is being very effective at all based on its first month in operation.I think one of the most interesting quotes from the submitters was from the senior tax specialist who came along to the select committee and said that he was professionally confused by the provisions in this bill. A number of others said that the brightline test was a bad idea incoherent and ineffective. I think people will be getting a little bit of the drift of the response of submitters at the select committee.The provision thatdemonstrates perhaps the level of confusion underlying this billis I think around the so-called “main home”. I am talking about clauses 6 and 15(5) (10) and (11). The main home provisions in this bill have carried over from the non-resident foreign buyers’ legislation that was passed recently. This is a very confusing situation around the main home. The bill basically requires that the land in question be used predominantly as the person’s main home and that it be used as their main home most of the time. In the situation where there is more than one home that could be subject to income tax because it has been sold within the 2-year period that is where we really start to get into the good stuff in this bill.The bill applies what it calls the “greatest connection - test” to determine which of these two properties is the person’s main home. The greatest connection - test determines on an objective basis—which is a bit of an oxymoron in this case—which property is the main home and it applies the following criteria: the time the person occupies the dwelling; where their immediate family if any lives; the person’s use of the dwelling; the person’s employment business interests and economic ties to the area where the dwelling is located; whether the person’s personal property is in the dwelling; and then the coup de grâce is where their social ties are strongest.Can you imagine how much work this is going to generate for tax lawyers in the leafy suburbs of Auckland as they attempt to make sense of these overlapping and vague definitions about which of two homes may have the greatest connection and therefore which one the person would be able to apply the exception to?It is completely confused. It does not actually use the existing established definitions in other comparable legislation—that would have been much simpler. In this case the Government has chosen to apply the vaguest and broadest definitions provide a little guidance on the side and hope that somehow that will deal with the sheer complexity and variety of situations that this law will have to be applied to. The whole issue around “main home” is in fact Mabo—it is the vibe. This bill is a tribute to The Castle. As previous speakers have said we will be back here fixing this up. It was a rushed chaotic and hurried political response to the problem of speculation in Auckland.