Nash Stuart; Rurawhe AdrianTAXATION (ANNUAL RATES FOR 2018-19 MODERNISING TAX ADMINISTRATION AND REMEDIAL MATTERS) BILLSecond ReadingHon STUART NASH (Minister of Revenue): I move That the Taxation (Annual Rates for 2018-19 Modernising Tax Administration and Remedial Matters) Bill be now read a second time.This omnibus bill simplifies and modernises New Zealand's tax system in particular for individual taxpayers. I'm therefore very grateful for the significant contribution made by the Finance and Expenditure Committee (FEC). The committee has made a number of worthwhile enhancements to the clarity and practicality of the bill.When I introduced the bill in June last year I talked in detail about the measures to simplify tax obligations for individual payers especially the year-end income tax filing. In the quest to simplify tax requirements and processes it is crucial to uphold the integrity of the tax system. I'll therefore take this opportunity to talk about enhancements to the Tax Administration Act regarding the Inland Revenue Department's ability to collect use and disclose information which I'm pleased have been carefully considered by the Finance and Expenditure Committee.Information collection and use: now information is critical for the efficiency and integrity of the tax system. As part of providing better more efficient services there are occasions when prudent information-sharing is desirable. The public expects Government agencies to serve them efficiently and with care particularly those agencies that manage sensitive and personal information. Inland revenue already shares information with other agencies and these arrangements generally work well. The bill modernises and clarifies the rules to better provide for confidentiality and sharing in the future and more clearly balances the trade-offs associated with information sharing. These proposals will make the information-sharing rules more efficient and transparent and better focus the confidentiality rules to clearly protect taxpayer information and more clearly set out any expectations.The bill also has two important improvements on how inland revenue collects information. Firstly it will clarify the legislation that information collected for one inland revenue purpose can be used for that department's other functions. This means that people won't have to provide the same information more than once to different parts of inland revenue.Angie Warren-Clark: Brilliant.Hon STUART NASH: Brilliant—easy. Secondly it provides a regulation-making power for repeat collection of third-party data sets. While inland revenue can currently collect this information the new rules will provide greater transparency where collection is done on a regular basis. The changes to how inland revenue manages information strike the right balance between careful stewardship of taxpayers' confidential information and improved customer service.As the Minister for Small Business I am pleased that the bill also proposes a new type of binding ruling called a short-process ruling". The new type of ruling is designed to be more accessible to small to medium sized businesses and individuals. This initiative responds to concerns raised by the small to medium enterprises that the current binding rulings regime was inaccessible and expensive. Binding rulings provide taxpayers with certainty about how inland revenue will apply the law to their specific circumstances. Currently binding rulings can be prohibitive to many smaller sized entities due to time cost and expertise required to apply for one. I should note that binding rulings are as mentioned binding on inland revenue but they are not binding on the taxpayer.The ability for a wider range of taxpayers to obtain binding ruling advice from inland revenue will help more taxpayers get their tax positions right the first time. Therefore the bill proposes to extend the ability to obtain binding rulings where the tax at stake is no more than $1 million to taxpayers who are in a practice who are excluded from this currently because of the complexity of the process and the fees charged. Well done FEC. FEC has recommended increasing the turnover threshold for entities that can seek short-process binding rulings from $5 million to $20 million. This amendment will open up this regime to many more medium-sized entities. The process for applying for a short-process ruling will be simpler. Applicants won't have to provide draft rulings or state the taxation law and propositions of law for which the ruling is sought.Let me talk about KiwiSaver. The Government is keen to encourage people to save for their retirement so I'm delighted to put forward some improvements to KiwiSaver that were based on the Retirement Commissioner's December 2016 review of retirement income policies. FEC has generally supported the proposed changes to the KiwiSaver regime which I will go over briefly. Two contribution rates of 6 percent and 10 percent will be added to give savers more flexibility and control over their KiwiSaver so they better adapt their level of savings to their personal circumstances.We're going to open KiwiSaver up to over-65-year-olds. The Government recognises there is no reason to limit access to a low-cost investment vehicle to those under 65. The bill removes the lock-in period for KiwiSaver which currently affects members who joined KiwiSaver between the ages of 60 and 65. This lock-in period was introduced to prevent people in the 60 to 65 age bracket from joining KiwiSaver to receive the $1000 kick-start payment and then withdrawing their funds soon after. Members may recall that the kick-start was repealed in Budget 2015 and this bill remedies an oversight at the time concerning the impact of the repeal of the kick-start payment. So there just is no sense to have the lock-in period in place. Without this kick-start it makes sense to enable savers to withdraw their funds when they reach the New Zealand superannuation age regardless of how long they have been a KiwiSaver member.We also propose changing the name of "contributions holiday" to "savings suspension".Hon Phil Twyford: Good move.Hon STUART NASH: Good move—thank you. This is not just semantics. It may seem it is but it is not. This name change more accurately describes what actually happens when a member takes a break from contributing to their KiwiSaver account. The savings suspension period will also reduce from five years to one year. It is not a holiday; it is a suspension from saving and it should be called what it actually is.Hon Phil Twyford: Exactly.Hon STUART NASH: Yes.Hon Kris Faafoi: Good move.Hon STUART NASH: Thank you—thank you. Thank you that's my legacy. FEC agreed that taking a five-year contributions holiday can have a significant impact on members' long-term savings. For many members five years is longer than necessary for their financial position to improve to a point where they could resume contributing to KiwiSaver and the one thing we know about KiwiSaver is that it will make retirement a lot more comfortable for every single Kiwi. What we also know is the sooner that Kiwis can contribute the better off they will be in the long term.FEC has considered these proposals and they agree that they make sense if we want to encourage people to save more for their retirement—well done FEC again. When contributing to the KiwiSaver proposals FEC proposed a further amendment to allow over-60s who join the regime before 1 July 2019 and are subject to a transitional lock-in period to exit the lock-in period and make withdrawals upon reaching 65 years of age. I'm happy to accept this additional proposal into the bill.There are a couple of other measures. The bill also adds 13 charities to the list of donee organisations with overseas purposes to Schedule 32 of the Income Tax Act 2007. It allows taxpayers to switch to the accounting income method from either the standard or GST ratio methods at any time during the income year. It recalibrates the use-of-money interest rule so interest on late payments is applied more fairly to taxpayers. It merges the adverse events Schedule intended for farmers struggling with an adverse localised event with the main income equalisation scheme. It proposes a new tax treatment to support bloodstock investment in New Zealand. It closes a loophole in the Goods and Services Tax Act as it relates to not-for-profits and it implements a number of minor but important remedial changes to a number of Acts including the Income Tax Act 2005 the Tax Administration Act 1994 and the KiwiSaver Act. Finally the bill also sets the annual rates of income tax for the 2018-19 tax year with no change from last year.In conclusion I would like to advise that FEC have removed the proposals that would allow inland revenue to make small changes to tax law to correct legislative anomalies. These changes are really important to get right and they have been redrafted since the introduction of the bill. In order to allow full consultation with the Legislation Design and Advisory Committee and the public on the redrafted proposals I intend to add them to the next taxation bill.I'm very pleased to commend the bill to the House and I look forward to its enactment. Thank you.ASSISTANT SPEAKER (Adrian Rurawhe): Members before I call the next speaker I just need to slightly correct the wording of the motion moved by the Minister. The motion is that the bill be now read a second time. So the question is that the motion be agreed to."