Nash Stuart: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — In CommitteeText is incorporated into the Bound VolumeNash Stuart: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — In Committee[Sitting date: 03 November 2015. Volume:709;Page:7667. Text is incorporated into the Bound Volume.]STUART NASH (Labour—Napier): There are just a couple of clauses that I would like to talk on and one is clause 14 “Section 35 amended (Adjusted taxable income)” which talks about adjusted taxable income and the other one is clause 16 which amends section 39A and that talks about the fact that the commissioner may take overseas income into account.The reason why I have a couple of questions on these clauses is that it seems that the language in the bill is a little bit arbitrary and whenever I see the word “may” or “might” as opposed to “must” I wonder under what circumstances the commissioner is actually going to exercise his or her judgment. As a number of colleagues have alluded to we need a system that is robust and we have to ensure that liable parents are actually meeting all of their responsibilities with regard to the children they have got. So this is why I wonder why the heading of this clause is “Commissioner may take overseas income into account”. Under what circumstances would the commissioner not take overseas income into account?What I actually would have liked to see here is “Commissioner must take overseas income into account” because if it is only a “may”—if it is only an arbitrary decision about whether the commissioner will or will not—there are two implications here. The first one is that it can be challenged in court and what could possibly happen is that a wealthy taxpayer a liable parent may start transferring income overseas or come up with some fancy scheme where it is deemed to be overseas income and then he or she may actually take a case against the commissioner to court because there is no obligation to count that overseas income as income as calculated for his or her liability under child support. So under what circumstances would the commissioner look at overseas income or take overseas income into account and under what circumstances would the commissioner not take overseas income into account? I just think it would have been a lot clearer if there had been an obligation on the commissioner to take overseas income into account.The second clause I would like to look at is clause 14 and this talks about a person’s adjusted taxable income. The term “adjusted taxable income” was actually amended in 2013 to bring it in line with Subpart MB of the Income Tax Act and this relates to family scheme income for example—and it says here that income from certain trusts is included. Again what brings a trust into the scheme and what keeps a trust out of the scheme? I think we are all well aware—or if we are not then I certainly can make people aware because I have come across this a number of times—that people hide income in trusts. In the past I remember in 2008 the Inland Revenue Department did some work and it had determined that about 10000 New Zealand families were getting Working for Families because they were not declaring income that was derived from their role as a beneficiary in a trust and therefore they were entitled to it. We changed the law because of that and as a consequence it made it a lot fairer and it made it harder for people to hide income in trusts and therefore avoid their tax responsibilities.But why have we included here only certain trusts? I would have thought that if you are drawing income as a beneficiary from a trust it is pretty clear. It does not matter whether that trust is income you have received from a business venture or whether it is money you have received because you have been lucky enough to inherit it or whatever—it is still income. I would have thought that if we wanted to make this scheme fair and if we wanted to ensure that it is in fact the children who are benefiting out of this we would eliminate any scheme or trust income that is allowed to be hidden or not taken into consideration when determining someone’s liability. I am unsure—the Minister in the chair Jo Goodhew may have some thoughts about this. I am sure she has some private thoughts about this because I am sure like most MPs that she would be disappointed if not disgusted to learn that there are actually still legislative means to hide income for the purposes of assessment for child support.So they are just a couple of quick questions. They are quite relevant because in this day and age there are a number of Kiwis who are earning overseas income. It is easy to structure your affairs. There are a number of Kiwis—and we know this—who are deriving income from trusts.