Ardern Jacinda: Social Security Amendment Bill (No 3) — In CommitteeText is incorporated into the Bound VolumeArdern Jacinda: Social Security Amendment Bill (No 3) — In Committee[Sitting date: 25 March 2015. Volume:704;Page:2633. Text is incorporated into the Bound Volume.]JACINDA ARDERN (Labour):The Minister for Social Development spoke to an issue that I am quite interested in as well and that I want to delve into a little bit further—that is speaking to the amendments to the Social Security Amendment Bill (No 3) that are made in Supplementary Order Paper 56. This I note interestingly is actually longer than the bill itself that we are debating so it seems that the Supplementary Order Paper is obviously of reasonable importance. It also seems like it reads like a bit of an afterthought—an opportunity to make some amendments where errors were again made.Just to clarify though—and I not sure whether or not the Minister really spoke to this point—I think the point that Ron Mark raised obviously was that if you read section 79(1) of the original Social Security Act 1964 it already does point out that “Where any person has been employed outside New Zealand and while so employed was liable for the payment of income tax on earnings from that employment then for the purposes of satisfying the residential qualification …” is deemed to have been in New Zealand for benefits purposes. The way I read that though is that a person was employed outside New Zealand and while so employed was liable for payment of income tax on earnings from that employment. So it is quite specific. It is almost saying it applies if you are employed outside New Zealand but those earnings from that employment that takes you outside New Zealand are liable for income tax in New Zealand. One could assume a number of roles where that might be the case. For instance if you were in a New Zealand Trade and Enterprise role perhaps or something like that—for those purposes you are considered to be paying tax in New Zealand obviously and therefore would still qualify upon return for New Zealand benefits. That seems pretty straightforward.The change that we have in this Supplementary Order Paper replaces section 79 in the Act and is titled “Persons who have had income tax deducted or withheld on earnings from employment overseas to be treated as resident and present in New Zealand”. It says: “This section applies to any person who was employed outside New Zealand if with respect to the person’s period of employment the person’s employer (or other relevant person) makes—(a) PAYE income payments … from which the person employer or other relevant person must withhold an amount of tax under the PAYE rules as defined in that Act;”. It seems to me that these two provisions are doing very similar things. I would be interested as to why it is there is specificity around PAYE—is that simply to bring it into alignment with the Income Tax Act 2007? Is that the main purpose? Or is there a functional change to the type of income that is deemed to be relevant by having this change? Because it seems to me that the original legislation seems to me like a broader catch-all than the subsequent amendment that we are making which is very specific towards PAYE. So I would be interested in the Minister’s comment as to why that change was deemed necessary.I am also interested that in these Supplementary Order Papers we are making an amendment that alters the qualification of someone for a relevant benefit in New Zealand. We can assume that the most likely benefit that will be covered by these provisions will be New Zealand superannuation. That is probably the thing that is going to be covered because of the qualification test around residency in New Zealand: you basically have to have been an income earner in New Zealand for a specified period of time and then 5 years before the date of your retirement. So basically you have to have been resident in New Zealand earning an income and paying tax or living here 5 years before the point at which you retire. If not then you have to stay here for an extra 5 years before you are eligible. That is basically the rule in a nutshell. However your eligibility is also affected by other forms of pension entitlement that you might have. So for instance say under section 79 you were one of these individuals who went overseas paid income tax in New Zealand but whilst you were overseas you may have also been eligible to pay into an overseas pension scheme. If that were the case even if you qualify for a New Zealand superannuation when you return because you qualify even under the amended section 79 in new clause 5A under the current rules in New Zealand—Mr Chair I have 3 seconds to go and I will be seeking another call. [Bell rung] Mr Chair?The CHAIRPERSON (Hon Trevor Mallard): Jacinda Ardern.JACINDA ARDERN: Even if you do come back at that point you have qualified for all intents and purposes and you have been paying income tax if you come back with an overseas pension then section 70 of the Social Security Act will apply to you.Section 70 is a very controversial section of the Social Security Act. Most members of this House who conduct any form of constituency work will be familiar with this section of the Act. It allows the Ministry of Social Development if you have an overseas pension that is considered to be equitable or similar to New Zealand superannuation to deduct dollar for dollar from that overseas scheme—dollar for dollar. We have been doing this direct deduction policy since 1938. That is the time period in which it has been happening. At that time probably there were not so many people who were eligible for overseas pensions—Stuart Nash: Great Minister of Finance then.JACINDA ARDERN: But since that great Minister of Finance—that is right at the time—12 percent now of our superannuitants are eligible for an overseas pension and I would wager that that will continue to grow. Some would say: “OK it’s fair. No one should really—if they have spent obviously enough time overseas to be eligible for an overseas pension—double dip come home be eligible for New Zealand superannuation collect the overseas superannuation and get that double whammy. If they are going to collect that and it is similar to the New Zealand scheme let us just deduct until they end up getting the same amount that everyone else in a pension scheme would.” The issue with this policy is about making a judgment over what overseas pension schemes are similar to ours and what are not. And that is where there seems to be real injustice in the way that the direct deduction policy works.I have seen countless cases of pension schemes that have been contributory where someone has put in their own money into a scheme come back to New Zealand assumed that they are going to be able to draw down that scheme which they have contributed to only to then have that deducted from their New Zealand superannuation entitlement. You can argue the rights and wrongs of a scheme like that. What you cannot argue in my mind is that under that policy if they deduct right down to zero such is the generosity of that alternative scheme the ministry will then start deducting from your partner’s entitlement—someone who may not have even lived overseas may have known you for only the last 10 years. They will have their pension deducted as well as yours because you have reached full entitlement. That cost from memory saves the New Zealand Government roughly $5 million a year that specific provision but it is totally unfair. In my mind it is a human rights violation because it predominantly affects women who have their entitlement deducted. Their entitlement is their entitlement. It should never be affected by anyone else’s.So the point that I raise for the Minister is this: if we are looking at eligibility criteria if we are looking at who is eligible for a New Zealand pension and has been overseas why not look at the big stuff? Why not look at whether or not in this changing globalised environment where more and more New Zealanders are working offshore where more and more are contributing to an overseas pension scheme—I have one—our scheme is equitable anymore? New Zealand First has a policy on this and Labour before the last election tried to get the select committee to review this issue because it was so difficult to navigate for so many people. That was turned down by the select committee—unfortunately voted down by National. But we have given our commitment that we will review the direct deduction policy with a view to removing the unfairness of this scheme—the fact that it is antiquated and no longer caters to the modern environment and the fact that so many schemes actually are not similar to New Zealand schemes and yet are being treated as such. So Minister I would have hoped that alongside Supplementary Order Paper 56 there would be a prime opportunity alongside reviewing section 79 to review section 70 to at the very least acknowledge the point that has been raised by the Human Rights Commission over the deduction of a partner’s pension or at least commit to reviewing the rest of the inequity that exists in our scheme currently.