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Taxation (Budget Measures) Bill (Consistent) (Section 19(1)) [2011] NZBORARp 16 (5 May 2011)

Last Updated: 29 April 2019

5 May 2011

ATTORNEY-GENERAL

LEGAL ADVICE

CONSISTENCY WITH THE NEW ZEALAND BILL OF RIGHTS ACT 1990: TAXATION (BUDGET MEASURES) BILL

1. We have considered whether the Taxation (Budget Measures) Bill (IRD 15200/4.0) (the ‘Bill’) is consistent with the New Zealand Bill of Rights Act 1990 (‘Bill of Rights Act’). We understand that the Bill is to be considered by the Cabinet Legislation Committee on Thursday, 12 May 2011.
   
2. The Bill amends the Income Tax Act 2007 to set the annual rates of income tax for the 2011-12 tax year and make changes to KiwiSaver and Working for Families (WFF). The changes to WFF raise an issue of apparent age discrimination.
   

Changes to Working for families

3. Section 19(1) of the Bill of Rights Act affirms that everyone has the right to freedom from discrimination on the grounds of discrimination in the Human Rights Act 1993. The grounds of discrimination under the Human Rights Act include age.
   
4. Drawing on the New Zealand case law on discrimination, we consider that the key questions in assessing whether there is a limit on the right to freedom from discrimination are:1
   
   • (a) does the legislation draw a distinction based on one of the prohibited grounds of discrimination; and if so
     
   • (b) does the distinction involve disadvantage to one or more classes of individuals?
     
5. In determining if a distinction arises, consideration is given to whether the legislation proposes that two comparable groups of people be treated differently on one or more of the prohibited grounds of discrimination.2 The distinction analysis takes a purposive and untechnical approach to avoid artificially ruling out
   

1 See, for example, Smith v Air New Zealand [2011] NZCA 20; Atkinson v Minister of Health and others [2010] NZHRRT 1; McAlister v Air New Zealand [2009] NZSC 78; and Child Poverty Action Group v Attorney-General [2008] NZHRRT 31.

2 Quilter v Attorney-General [1997] NZCA 207; [1998] 1 NZLR 523 (CA) at [573] per Tipping J (dissenting) relied on in Atkinson v Minister of Health and others [2010] NZHRRT 1 at [199]; McAlister v Air New Zealand [2009] NZSC 78 at [34] per Elias CJ, Blanchard and Wilson JJ and at [51] per Tipping J; and Child Poverty Action Group v Attorney-General [2008] NZHRRT 31 at [137].

discrimination.3 Once a distinction on a prohibited ground is identified, the question of whether disadvantage arises is a factual determination.4

6. The Working for Families (WFF) provisions of the Income Tax Act 2007 provide for tax credits paid in cash for certain families with children. The amount of the tax credit depends on the family’s annual income and the number and age of the children. Once a family’s income reaches a defined level, each dollar over this threshold will cause a certain amount to be taken off the tax credit. The amount taken off, known as abatement, will continue as income increases until the tax credit is exhausted. The Bill will lower the threshold amount and increase the rate of abatement. The changes to the thresholds and abatement rates do not draw a distinction based on one of the prohibited grounds of discrimination and are not discriminatory.
   
7. The WFF tax credits are made up of four types of payments: family tax credit, in- work tax credit, minimum family tax credit and parental tax credit. Currently, the family tax credit has a prescribed amount5 that is higher for children aged 16, 17 and 18 than for younger children.6 The prescribed amount increases over time generally in line with inflation. The Bill seeks to suspend any future increases to the prescribed amount for 16 to 18 year olds until the younger and older children’s prescribed amounts are the same. The increases will then continue for all children.
   
8. The Bill distinguishes between two groups of children who form part of the entitlement to Family Tax Credit for their parent(s) based on the child’s age. For the purposes of this advice, we note that s 21(1)(i) of the Human Rights Act 1993 defines “age” as any age commencing with the age of 16 years.
   
9. The purpose of the distinction is to eventually align the entitlement between the two age groups.7 The Inland Revenue Department advises that there is no obvious rationale for the older group to receive a greater entitlement. Aligning the younger8 and older prescribed amounts would simplify the administration and reduce the fiscal costs of WFF. The alignment would take place gradually over time and it is not forecast to be complete until 2018. It will also be done in such a manner that there is no nominal reduction of family tax credit amounts as the amount for those aged 16 years or older is simply not increased for inflation. Under the Bill, once the entitlement is equalised, the distinction will end.
   
10. We consider that freezing the entitlement of the older group until the younger group catches up is not a disadvantage as it is an equalisation measure.
    

3 Atkinson v Minister of Health and others [2010] NZHRRT 1 at [211]- [212]; McAlister v Air New Zealand [2009] NZSC 78 at [51] per Tipping J; and Child Poverty Action Group v Attorney-General [2008] NZHRRT 31 at [137].

4 See for example Child Poverty Action Group v Attorney-General [2008] NZHRRT 31 at [179]; and

McAlister v Air New Zealand [2009] NZSC 78 at [40] per Elias CJ, Blanchard and Wilson JJ.

5 Income Tax Act 2007 s MD 3(4).

6 Note that this cohort of children must not be financially independent and those 18 years of age must be attending either secondary school or tertiary education.

7 Note that there are three amounts of Family Tax Credit for the second or subsequent child: under 13 years, 13-15 years and 16-18 years.

8 For second or subsequent children this means aligning the 16-18 years amount with the 13-15 years amount.

11. Assuming only for the purposes of this advice that 16 to 18 year-olds suffer a disadvantage, any such apparent discrimination would be justified. IRD advises that broadly there is no policy justification for differential rates based on the current age bands. Alignment would provide improvements in administration and compliance. The changes will also preserve more tax revenue that may be expended on more pressing matters. The distinction will only be temporary until the prescribed amounts are equalised.
    
12. We consider that the distinction is justified, the means adopted to achieve it are proportionate, and the practical benefits to society of the distinction outweighs the harm done to the individual right or freedom.9
    
13. This advice has been prepared by the Public Law Group and the Office of Legal Counsel. We have concluded that the Bill appears to be consistent with the rights and freedoms affirmed in the Bill of Rights Act.
    

Jeff Orr

Chief Legal Counsel Office of Legal Counsel

In addition to the general disclaimer for all documents on this website, please note the following: This advice was prepared to assist the Attorney-General to determine whether a report should be made to Parliament under s 7 of the New Zealand Bill of Rights Act 1990 in relation to the Taxation (Budget Measures) Bill. It should not be used or acted upon for any other purpose. The advice does no more than assess whether the Bill complies with the minimum guarantees contained in the New Zealand Bill of Rights Act. The release of this advice should not be taken to indicate that the Attorney-General agrees with all aspects of it, nor does its release constitute a general waiver of legal professional privilege in respect of this or any other matter. Whilst care has been taken to ensure that this document is an accurate reproduction of the advice provided to the Attorney-General, neither the Ministry of Justice nor the Crown Law Office accepts any liability for any errors or omissions.

9 Hansen v R [2007] NZSC 7 [123] per Tipping J.