Smith Nick: Taxation (KiwiSaver HomeStart and Remedial Matters) Bill — Second ReadingText is incorporated into the Bound VolumeSmith Nick: Taxation (KiwiSaver HomeStart and Remedial Matters) Bill — Second Reading[Sitting date: 24 March 2015. Volume:704;Page:2512. Text is incorporated into the Bound Volume.]Hon Dr NICK SMITH (Minister for the Environment) on behalf of theMinister of Revenue: I move That the Taxation (KiwiSaver HomeStart and Remedial Matters) Bill be now read a second time. As the title of the bill suggests there are two parts to this tax bill. The first part supports the Government’s HomeStart package for New Zealanders who are saving to buy their first home by extending the current KiwiSaver withdrawals for first-home buyers from 1 April 2015. Currently KiwiSaver members who are purchasing their first home can withdraw the contributions that they and their employer have made in order to supplement their deposit on a first home. What this bill does is allow them to also withdraw their member tax credits. This will give those KiwiSaver members who have been in the scheme for 5 years access to an extra $2500 or an extra $521 per year to pull together that deposit. They will not however be able to withdraw the Government’s $1000 kick-start contribution. This is to ensure that the member’s KiwiSaver account remains open and active after the withdrawal of the eligible funds for their first-home deposit.These proposals are part of the Government’s broader programme for assisting New Zealanders to pull together that all-important deposit for a home and they are also about incentivising the land development sector to produce more homes within an affordable range. This is the most generous support that the Government has provided for people wanting to own their own homes since the days of the State Advances loans and since the time when people were able to capitalise their family benefit. If you take for instance a typical couple in Auckland earning the average wage after a period of 5 years they will now have access to $35000 out of their KiwiSaver and adding to that the $20000 grant from the Government they will now have with no other savings access to $55000 to put a deposit on a new home. When you add these schemes together with the Welcome Home Loan which enables an exemption from the Reserve Bank’s loan-to-value ratios it would mean that that person would now be in the market place to be able to afford a home in Auckland of up to $550000.That is a real step forward for Kiwi families that are having that challenge of being able to own their first home. But this package also needs to be seen to be aligned with the real challenge we have which was identified by the Productivity Commission. What it said was that over the last 30 years because of difficulties in getting land subdivisions through the Resource Management Act there has been a real switch to new homes—Grant Robertson: Ugh!Hon Dr NICK SMITH: —meeting only the very high end of the market. Well I will give Mr Twyford the numbers. In the 1970s 37 percent of the new homes that were built were below the median price. That figure recently got down to just 5 percent. So the Government is saying that we need to reform the Resource Management Act to make it easier for the development sector to produce more affordable homes but we also want to feed the demand element and actually provide an incentive for that sector to produce homes within these price ranges: under $550000 in Auckland $450000 in places like Christchurch and $350000 in centres like Southland.This is a very good programme and I was intrigued during the election campaign when members opposite said that they opposed this bill. They spoke—in one of those sorts of vox pop opportunities—to a young person who said that they really liked this policy because it empowers young people to go and buy the home they want rather than having to get a home that was in Labour’s view to be built by the State. We are a party that believes that people should have the choice and that the market should be able to have the incentives to produce—whether it be a townhouse whether it be an apartment whether it be a quarter-acre section—what New Zealanders actually want and our policy provides for that flexibility. I have received letters and I have met with hundreds of young New Zealanders who will welcome the introduction of these incentives on 1 April—which is as I have said the strongest support that a Government has provided for first-home buyers in more than a quarter of a century.The second part of the bill focuses on making sure that tax rules are applied consistently and fairly—in this case in relation to new rules applying to veterans’ entitlement schemes contained in the Veterans’ Support Act 2014. To ensure that the income replacement payments made to New Zealand veterans are taxed correctly the bill introduces several amendments to the Income Tax Act 2007 and the KiwiSaver Act 2006. The proposed changes will make it clear that veteran income replacement payments will be treated in the same way as ACC income compensation for taxation for social policy and for KiwiSaver purposes. The amendments also clarify that KiwiSaver deductions can be made from veteran income replacement payments but that the KiwiSaver automatic enrolment rules and compulsory employer contributions will not apply to these payments. These proposed changes will take effect from the date of enactment with the exception of the corrections to the retirement lump sum supports which will apply from the date of the enactment of the Veterans’ Support Act 2014. The amendments are important to give veterans who are receiving income replacement payments clarity on the correct tax treatment of those payments and to do it in an equitable way so that they are not disadvantaged.These are the main two proposals in the bill. In addition I wish to advise that I shall be introducing amendments to the bill by way of a Supplementary Order Paper in the Committee of the whole House. The reason for these amendments is to further enhance access to the KiwiSaver first-home withdrawals with some technical corrections to the drafting. The issue there which will be dealt with in an Supplementary Order Paper is that the Government is very much wanting to provide the incentives for new homes and one of the practical difficulties for a KiwiSaver member who is withdrawing their money is that the current law does not give them access to the money to put down a deposit on a new home construction. That Supplementary Order Paper will make that easier and that will enable us to be able to use the KiwiSaver scheme and these withdrawal tools to be able to support the construction of new homes.Can I conclude by thanking the Finance and Expenditure Committee for its consideration of the bill and for the recommendations that it has made on the basis of those submissions. I commend this Taxation (KiwiSaver HomeStart and Remedial Matters) Bill to the House.