Woodhouse Michael; Parker DavidHon MICHAEL WOODHOUSE (National): I think this question of deemed intent" is very important because how Minister Parker portrayed the changes the previous National Government has made needs to be looked at in its broader context. Like Mr Bayly I'm not sure what the Minister was referring to when he was talking about the National Party saying other things. What really mattered was the policy changes that we made. Now in order for something to be subject to income tax under the Act there needs to be a consideration of the deemed intent on purchase. The timing of the intent on purchase and what goes on in the mind of the purchaser is at the heart of something that could be liable for income tax. What we found—which is frankly true—is that when an investor turns a property around purchasing it then selling it within two years it's a much harder thing to determine whether their intent on purchase was to gain income from rental for example. And the purpose of the introduction of the brightline test at two years was simply to say "If you do it within two years we consider your deemed intent to have been sale for a capital profit and therefore that's on the income account. That is taxable."Now what we have is every other class of asset where the rule still applies—deemed intent. If I purchase shares intending to get a profit from dividends I could hold those shares for 10 years. They could appreciate significantly in value on the stock market but the increase in that value is not taxable. I could buy my plumbing firm with the intention of selling plumbing services to the good people of Dunedin and if I'm that good at it and the value of the capital asset appreciates to the point where there is a capital gain because my intent is to earn income that capital gain is not subject to a tax. What we're now being asked to accept is that there is somehow a co-relation between what the National Party did over two years and extrapolating that out over 10 years—and Treasury wanted it 20—to say that regardless of the stated deemed intent that the taxpayer has on purchase he or she has to hold that asset for more than 10 years to prove to IRD that their deemed intent was not sale for capital gain. I would like to ask the Minister to check with officials if my assessment of the current tax law is correct because this is a significant departure in principle from what we are doing. Now we shouldn't be surprised by that. We've heard a lot in terms of departures from principles and the non-deductibility of interest expenditure which the Government signalled today and which they're going to do a lot of work on is an egregious breach of those principles where taxable income should be gross income less legitimate expenses. An interest expense is legitimate according to the Government in every other circumstance but the gaining of income by the offering of residential property rentals. So I would firstly point out that it is a very long bow to draw to say that the National Party's default deemed intent at two years is the same policy decision that this Government is making over 10 years. It is impossible to conceive that the mum and dad investors that Megan Woods slammed on the radio this evening—90 percent of the residential property market is of people who own one or two properties; 90 percent. So we're not talking about fat cat property investors here. We're talking about the mums and dads whose intent was to provide an income stream—quite legitimately—over a long period of time. And the Government is saying "That's not true." They're calling taxpayers fibbers basically by saying "We would have liked to have gone out to 20 years but actually that looks too much like a capital gains tax."Andrew Bayly: No they're calling them speculators.Hon MICHAEL WOODHOUSE: Speculators—exactly. Never mind that a nest egg and repaying the mortgage on that is a very good savings scheme—very stable probably as stable if not more so than business investments and the stock market. But now they're being called speculators. I just want to make sure I understand whether or not I have got my understanding of the Income Tax Act correct because deemed intent seems to be the case for every other thing but this. Hon DAVID PARKER (Minister of Revenue): Neither the original brightline test legislation nor this actually use the phrase "deemed intent". So the members of the Opposition are articulating as they see it. I've explained it as we see it. We obviously disagree."