Nash Stuart: Taxation (Bright-line Test for Residential Land) Bill — In CommitteeText is incorporated into the Bound VolumeNash Stuart: Taxation (Bright-line Test for Residential Land) Bill — In Committee[Sitting date: 10 November 2015. Volume:710;Page:7848. Text is incorporated into the Bound Volume.]STUART NASH (Labour—Napier): I am going to speak on Part 2 of this bill. This is about non-active trusts. We need to be very careful when we are looking at this because trusts have been used and abused to hide income from property investments for far too long. Whenever I see in legislation as I see in new section 43B in clause 16 where it says “Non-active trusts may be excused from filing returns” I do not think there should be a point in time when anyone is excused from filing a return even if that return has a nil return in it—nil income or costs etc. etc.—because the law around trusts has been tightened up a lot recently and the reason for that is provisions around gift duty and the recognition that trusts have been abused.Let me give you one example. I think it was in 2009 when the Inland Revenue Department determined that about 10000 New Zealand families were claiming Working for Families because the income derived from a trust was not counted as income for purposes of Working for Families calculations. We did tidy that up and in fact those 10000 people who were deliberately rorting the law were brought back into the tax system. Whenever I see something around trusts that says “may be excused from filing returns” I do not think that is appropriate even though we are supporting this bill.The bill does list what a non-active trust is but by the definition it provides here I do not think that is enough to actually say you are not required to file a return. The last thing we want to do in my view is lose sight of actually how many trusts are holding properties or are holding assets or are in fact being used to hide various forms of income in any way shape or form.Let me give you an example here. New section 43B says that “(1) A trustee of a trust is not required to furnish a return of income for the trust … if—(a) throughout that tax year the trust is—(i) a non-active trust; and … (b) a trustee of the trust has made and furnished to the Commissioner in a form approved by the Commissioner—(i) a declaration that the trust is … non-active …”. But we need to understand what a non-active trust is and that it says in subsection (2) is one that “(a) has not derived or been deemed to have derived any income; and (b) has no deductions;”. That does not mean that the trust is inactive. All it means is that it has not derived income.We all know that among trustees or those that have trusts there is a lot of activity that goes on around this without necessarily deriving income and I do not think that that means that we should not be filing returns because as mentioned the risk around this as I see it is that the Inland Revenue Department loses track of how many trusts are actually out there the assets that are held in trust and what the trustees are actually doing. A simple filing saying there is no activity means that at least there is some compliance that has to be undertaken. So I just think that this stuff should be tightened up; that is all I am going to say on this.