Woods MeganHon Dr MEGAN WOODS (Minister of Research Science and Innovation): Thank you Madam Chair. I just want to respond to a couple of the questions that have been put to me here by speakers so far. First of all one of the contributors raised the issue of clause 7 and wanted to know about how this would operate. What I'd like to give that member a reassurance around is that this is one of the integrity measures that I think makes this a very strong piece of legislation and that what officials have done when they have been designing this process is they have spoken to a number of officials in jurisdictions that already have R & D tax incentives in place and looked at what is required to ensure the integrity of the scheme.This is a rules-based system and we have to ensure that within this bill we have a suite of integrity measures and clauses 7 and 10 and 27 and 30 and 32 to 37 contain these integrity provisions within the legislation. Specifically the clause that was raised by an earlier speaker was clause 7 and this is an anti-avoidance rule. The rule will only apply where someone enters into an arrangement to defeat the intent and application of the tax credit rules. This is a very high threshold to be used and it allows the commissioner to reduce the amount of eligible R & D expenditure involved in a claim in these particular circumstances.But I think there's just a little bit of understanding of how clause 7 will operate. What it does not do is allow the commissioner to change the R & D tax credit rate. It will allow the amount that is available to be claimed under there. This is an important anti-avoidance rule and it is very similar to many others that we already have in the Income Tax Act 2007 and it is necessary from this integrity perspective. It's only expected to apply in a very small minority of cases and I hope we don't have to apply it but it is important that we are writing robust legislation that does have these integrity measures in place.A previous speaker also raised the question of why it is that within Part 1 of this bill there are different provisions for non-tax liable businesses. That is very simple. It's because we firmly believe that when we're setting up a tax incentive scheme we have to ensure that we're also putting in place incentives for some of the companies that are the most innovative that do have the most potential to transform our economy and many of those companies are in the pre-profit stage. As I'm sure every member of this House will understand a tax rebate isn't a great deal of use to you if you're not paying tax and therefore can't apply the rebate. What we have said is that we need to get this scheme working so we've simply got to do more as a country and I agree with the speaker that's just taken his seat Mr McKelvie. We have to do more to lift New Zealand's very low levels of expenditure on R & D. This is a scheme that is aimed at going from 300-odd businesses receiving a growth grant to 2000 to 3000 receiving assistance under the R & D tax incentive. What we have committed to doing is a phased approach. We are working in terms of the provisions that are there for these pre-profit firms in the 2019-20 tax year and we are doing further work with that industry to see how it is that we can roll out post-2020. So that is why there are different treatments for non-tax liable businesses that are contained within the bill. I'd like to reassure the member that took his seat Ian McKelvie when he said that he was worried that small businesses wouldn't be able to access this. This is something we've spent a lot of time talking to industry and to the business sector about—about how it is that we could set up a regime that actually was fit for purpose for our small businesses because we know many of our start-ups many of our small businesses are where innovation happens. What we heard really clearly was that under the current regime of the growth grant schemes $300000 expenditure on R & D was simply too high a threshold for those small businesses to be able to benefit from it. So we listened carefully and under this tax incentive scheme that threshold is lowered to $50000. If you're using an outside provider such as a Crown Research Institute there is no minimum threshold. So this is a scheme that is set up very much to benefit some of our most innovative some of our small businesses that we know have the power to transform our economy. We've made sure that we've consulted widely we've listened today and we've incorporated that feedback into the provisions. Thank you Madam Chair.