Nash StuartHon STUART NASH (Minister of Revenue): Thank you Madam Chair. Let me just agree with Amy Adams on a couple of things she said in her opening contribution. This is a good piece of legislation. We had robust debates about this normally at the Finance and Expenditure Committee. It went through the select committee process. We all agreed; it was a bill that I took over from the Hon Judith Collins—and it makes the tax system easier. But what I'd like to talk about in the majority of my contribution is a Supplementary Order Paper (SOP) that I have introduced and this is about extending the brightline test from two years to five years. Now what I've heard this afternoon is a whole lot of people talking about how investors are going to get caught by this brightline test but I dispute that. I myself own rental property and I don't consider myself to be a speculator. I'm an investor. I have bought the property to hold on to for rental yield. Before the two-year brightline test came in we had something that was called the intention test in the Income Tax Act. What the intention test was based on was the intent of the purchaser of what they were buying that property for. If the intent of the purchaser was to buy that property for capital gains then the investor—the purchaser—had to pay capital gains tax on that property when it was sold. If the investor or the purchaser bought that property to make a rental yield then they did not need to pay tax on the profit of that property when it was sold. What we found—when I say we" what the IRD found—was the intention test was almost impossible to police because all anyone needed to do was say "Well you know I bought this property for a rental yield. My circumstances have changed within six months. I'm going to flip this property on." What we found was that speculators were getting around having to pay capital gains tax because it was almost impossible to prove their initial intention when buying a property. So what happened was the last Government introduced a two-year brightline test and that was done in 2015. On the select committee that considered this was David Bennett Andrew Bayly—who's spoken—Chris Bishop Clayton Cosgrove Julie Anne Genter myself Winston Peters and Grant Robertson. Now we heard numerous submissions on this. We went through this full select committee process and heard a number of arguments for and against. But one thing I will say is that the Labour members on that select committee in all the speeches we gave when we were debating this bill in the House talked about the fact that two years was not long enough and it had to go to five years and the reason we said that at the time was because even then Treasury could not determine how much money this was going to bring in. There was so much uncertainty about it that we did not think it was going to provide any real meaningful change in behaviour. Speculators were still going to buy those houses and hold on to them for two years and one day and still flip them on and in fact we have seen a lot of that continue. In fact it is interesting. Even just looking at the consequences of the two-year brightline test at the moment the IRD gets all information on land sales and what we're finding is 50 percent of a small sample that they looked at had not complied with the rules. These are speculators. Investors are not going to get caught under this. We believe—I believe fully—that investors are the sorts of property owners who buy a property and who hold on to it for rental yield as per the purposes of the Income Tax Act and then sell it after five years. They're holding on to it for the true purpose of rental yield not to flick it on. We always felt that two years was not long enough. We actually signalled this throughout the election campaign we signalled this when the bill was in the House and we've signalled it ever since. So it should come as no surprise to anyone that we have made this change through this SOP 13 to take the brightline test from two years to five years. The other thing I'd also like to point out is the amount of money we think this will bring in and the amount of people we think this will affect. We think it'll bring in an extra $50 million and we think it'll affect perhaps another 2000 people. It's not too many more but it will get those people who were buying and flipping properties. It will get those people who should be paying tax in the first place. The reason that this is important is because we believe that if you are making income out of selling rental properties you should be brought into the tax system. So this is about enhancing the integrity of the tax system—most important—because we felt there were too many people who actually were getting away with not paying their fair share. So we've heard the arguments. They were presented in front of the select committee. We know what they are. We think this is the right thing to do."