Bayly Andrew; Parker DavidANDREW BAYLY (National—Port Waikato): Thank you Mr Chair. I just want to turn to a conversation before dinner. I asked the Minister for advice or information he had to hand which supported his proposition that the reason for urgency was that if the Government didn't bring this in basically starting effective from close of business on Friday night there would be a whole stack of people who would go out and buy properties and try to take advantage of the market. My proposition was that actually because of the tax changes they would make it less likely that people would go and buy properties; in fact they would more likely want to sell their properties given they will no longer have interest deductibility and in fact they will have to continue to hold the property for 10 years otherwise they will be paying a capital gains tax (CGT). So I'm just hoping the Minister will answer that question because I think that cuts to the core of why there needed to be an urgent debate and why this is being rammed through like a steam tractor to put this in place very quickly.The other thing is that we'd just started to have a nice little conversation before the break about the difference between whether this is a tax on capital gain or whether this is just a tax on income. So Minister I'd really like to have a conversation with you because I think we should go back. When the Key Government brought in the issue around a brightline test the underlying philosophy of what John Key and Bill English particularly were trying to deal with was the issue of the lack of certainty around what is the intent clause of the Act. Do you intend to sell the property or do you intend to hold it for your own personal use and what the intent for the short two-year period was to make it absolutely crystal clear for our good friends at the Inland Revenue Department to be able to enforce the intent clause which basically said if you hold a property for less than two years that is deemed to be someone with the intent of buying and selling a house in a short period of time—i.e. flipping houses which we've always talked about previously in this House.Your decision to move to increasing the brightline to five years—and of course today at 9 o'clock announcing you'll extend it to 10 years—I think I inferred from your comments earlier that you still saw that as a tax on income. Can I put it to the Minister that the difference between tax treatments is quite important and presumably for the Minister of Revenue it's very important. So if I am in the business of buying and selling property that is an income gain and I pay tax on it. And so if I am a property developer I will pay the gain on that as income. There's a difference if I am buying and selling a capital item which I do periodically and so the corollary is that I'm buying and selling a piece of plant which is a capital item; it's not my normal tradable stock. So I would suggest to the Minister that certainly with the five years but very definitely with the move to a 10-year tax the Government has put in place a regime which means that if you buy and sell a capital asset—namely a home—within 10 years you will pay a gain on that profit from the sale of that capital asset. That is quite a big point of differentiation. I know it's a bit pointy headed but I've heard the Minister talk about this before and I'm very interested to see what his reaction is to that.Hon DAVID PARKER (Minister of Revenue): In respect of that last issue that Andrew Bayly raised: when the brightline test was first introduced by the prior National Government at two years the then Government was very clear that from their perspective it was tax on the income that is earned if someone sells within that period at a profit and we apply the same logic to the longer period.Andrew Bayly: It was a clarification of deemed intent.Hon DAVID PARKER: Well you say that was a clarification of deemed intent. They were not the only words that were used at the time. We apply the same language to this. We know that the Opposition disagrees with it but that's our logic.In respect of Nicola Willis's question I'm advised that if a person were to have a house in Auckland they're away for two years and they rented it out for that period then there is a change of use and there will be an apportionment in respect of the increase in value depending on the length of period that someone's away.Nicola Willis: CGT on the family home!Hon DAVID PARKER: No it's not. No.Nicola Willis: Yes it is.Hon DAVID PARKER: No it's not. And if it's not rented out then it depends on the facts. If a person regularly visits their Auckland home then it's likely to remain the person's main home and won't be taxed.ANDREW BAYLY (National—Port Waikato): So can I just continue that conversation? What I heard from the Minister was that because someone spoke during the time that the initial brightline test of two years was put in place you have taken those words and said For the first time ever we agree with National and we're going to now use that as a definition." and it's an excuse to carry on taking it from a two-year period to a 10-year period.My first point I would say to you very clearly—and I'm sure your IRD advisers over there who are helping you would be clear that there was a lack of clarity around the intent. What we did was made it very very simple for people and for the IRD which acts for all of us to be clear that if someone was buying and selling within 24 months they would have to pay a gain on that capital asset right? So that's quite different from what we're talking about because once you take it out to a 10-year perspective if you're not a trader in those assets then that is a tax on an irregular periodic sale of a specific asset and it is a capital item. So apart from relying on the National Party's words—and I don't know quite what you were quoting but I'm just trying to deal with it as a tax issue and you are the Minister of Revenue—can you tell me why I'm wrong to characterise the sale of a periodic asset namely a house that you have to hold for a minimum period of 10 years and if you don't you will be paying a gain on the sale of that capital asset?Hon DAVID PARKER (Minister of Revenue): I've already addressed that point."