Penk ChrisCHRIS PENK (National—Helensville): Thank you Madam Chair. If you'll allow me to start at the beginning of Part 3 Amendments to Income Tax Act 2007" clause 104B amending section CB 6A provides clarity about what is now meant by the phrase "bright-line test" and how that would be applied. We can—and in fact do—have debates and discussions across the House about the appropriate period of time for that test to apply but I thought I might begin my contribution by just outlining for the sake of anyone who is unclear within or without the Chamber what it is exactly that the brightline test does. It's a popular misconception that the brightline test is some kind of tax. In fact a tax applies on the sale of land in certain ways that we will soon see and really the point of the brightline test is actually a way of understanding how that tax is to be applied in a situation where the intention of a person who has bought and then disposed of land cannot be gauged very easily. Of course intention is somewhat subjective and so it's been difficult to determine historically and so it is that previous parliaments to this came up with the idea that within a certain period of time—two years originally and soon to be five it seems—if a person were to buy and then onsell the land then it would be deemed effectively that their intention all along had been to buy and sell for profit and so the income that they would gain from that profit would be taxable. So it's an exercise in certainty and it's an exercise in providing clarity as well. The phrase "residential land" is used in that I presume but I must confess I don't know whether that's previously already being clarified in the legislation. If it's anything like the use of "residential land" in similar phrases within the Overseas Investment Act then it will be somewhat messy and difficult to determine in certain cases. But I take it that there isn't any particular contention or debate about its meaning in relation to the legislation brought forward before the House today. So looking then at the way that clause 104B would operate in amending section CB 6A(4) the subsection heading would change. Well that's fine because that's not a substantive change in itself; merely an aid to interpretation. But we do see that the phrase "a freehold estate" would be replaced by the phrase "an estate or interest". "An estate or interest" is a broader conception of how one may relate to land because an interest in land might be something that is broader than simply owning and certainly having a freehold estate. So the intention there I presume is to have somewhat broader capture of those to whom the brightline test would apply. That's a policy direction that the current Government has indicated that it is intending to make and in that sense I suppose we can observe at least that the legislation will reflect that desire that they have.In particular I wanted to have a look at clause 108 as well which talks about "Section CB 15 amended (Transactions between associated persons)". The reason that this is significant is because it sets out the time frame within which a person can dispose of land and still be treated as under the 10-year time frame there as opposed to five years which we've seen previously. What's going on here is that we've got a situation where two different persons are contemplated: a transferor and a transferee.What we are saying effectively in this legislation or the committee in general is saying—whether or not we on this side of the House agree with it; if we are in the minority I suppose that's all academic—collectively is that the person who has acquired the land from someone who is associated with them has effectively acquired it at the time that the first person acquired it and so the second person won't be penalised by something of the nature of an entity change that might be perfectly innocent not designed to defeat the taxation legislation not an evasion and not an avoidance either for that matter. But it might be that a single trust remains continuously in ownership or holding an interest but the trustees may change so the legal ownership might technically change albeit that the beneficial or equitable ownership doesn't.Another example might be that land is transferred by way of a matrimonial property change—or relationship property change I suppose we should say—and so there are good reasons that it might be that land transfers from one person to another and that the second person who owns it might legitimately be considered not to have owned it as recently as that transfer but instead going back to the original acquiring of the land. The significance of that of course is that in this case what we're actually talking about is a scenario where it's to the benefit of those persons for tax reasons because a period of five or 10 years as the case may be commences at an earlier point and if one is selling or disposing of the land outside that period then one will be able to—I say "get around" the tax and I use the term very loosely and it's not the right term. I'm trying not to use "avoid" or "evade"; I'm trying to avoid "avoid" so to speak. So it might be that for perfectly legitimate and innocent reasons such a transfer takes place and the tax is not incurred at that point.Before I finish my contribution I'll just step back in time briefly sort of jumping a bit to clause 107 which amends section CB 11. That's talking about a situation of building business and that's where disposal takes place within 10 years of improvement. So whereas previously we've seen a section that talks about the acquisition and the disposal of land here what we're actually concerned with is a time frame that's triggered by improvements being made to the land. Reading the legislation at face value and without having had the benefit of attending the select committee in which it was discussed and examined but having some experience in these matters from a previous professional life the improvements that are completed trigger a time frame of 10 years and it's the time at which the improvements are completed as distinct from having merely begun that the clock starts ticking so to speak.We're talking about the beginning of the improvements as well but that's actually in relation to the person carrying on a business of erecting buildings or an associate of the person carrying on a business of erecting buildings. The significance of the business aspect as I understand it but I'll invite the Minister to correct me if I'm wrong is that we're talking about a business as opposed to being resident in the home in a way that we might regard as being consistent with having that as one's family home. The subject of family home is coming up in debates and discussions in this House in other contexts and I won't go there so to speak but I did just want to highlight that it seems there's a consistent theme running through more or less that a family home is to be regarded as somehow separate or different from those who are in the business of conducting improvements for the purpose of building and elsewhere we see similarly a subdivision business is to be treated in a particular way.Finally within my remaining time I would just like to note that the legislation makes a deliberate effort to distinguish the situation that was previously the case where the brightline test would apply in relation to an interest being acquired that is contingent. In other words an interest that relied on another thing happening at new section CB 6A(4)(d) in clause 104B and what we now have is a situation that contemplates an agreement being entered into under which the person acquires the estate or interest. So I suppose the obvious question there which is on everyone's lips is whether this characterisation of the acquiring of the land is broad enough and if the answer is yes then I suppose it's clear enough that the interest being acquired—that is the purchase—more or less is captured by the provision and I suppose that's what's intended by the Government in that.If the Minister cares to correct me on any of these assumptions and presumptions that I've made then I would welcome that but if not then I suppose I shall leave it as a record for this committee that that is my understanding of those particular sections and their import and I look forward to hearing more debate and discussion and indeed contributing to it."