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Families Package (Income Tax and Benefits) Bill (Consistent) (Section 19(1)) [2017] NZBORARp 53 (5 December 2017)
Last Updated: 9 January 2019
5 December 2017
Hon David Parker, Attorney-General
LEGAL ADVICE
LPA 01 01 21
Consistency with the New Zealand Bill of Rights Act 1990: Families Package
(Income Tax and Benefits) Bill
Purpose
- We
have considered whether the Families Package (Income Tax and Benefits) Bill
(‘the Bill’) is consistent with the rights
and freedoms affirmed in
the New Zealand Bill of Rights Act 1990 (‘the Bill of Rights
Act’).
- We
have not yet received a final version of the Bill. This advice has been prepared
with the latest version of the Bill (IRD 20772/6.11).
We will provide you with
further advice if the final version of the Bill includes amendments that affect
the conclusions in this
advice.
- We
have concluded that the Bill appears to be consistent with the rights and
freedoms affirmed in the Bill of Rights Act. In reaching
that conclusion, we
have considered the consistency of the Bill with s 19(1) (freedom from
discrimination). Our analysis is set out
below.
The Bill
- The
Bill implements a suite of amendments to the Income Tax Act 2007 and the Social
Security Act 1964 which provide targeted financial
assistance to low and middle
income families with children, and those receiving main benefits,
superannuation, or veteran’s
pensions.
- The
Bill repeals the personal tax changes enacted by the Taxation (Budget Measures:
Family Incomes Package) Act 2017 (the Taxation
Act). As a result, the personal
income tax thresholds from 1 April 2018 for the 2018-19 income tax year will be
those applying for
the 2017-18 year. The Independent Earner Tax Credit, which
was also repealed by the Taxation Act starting from 1 April 2018, will
be
reinstated.
- The
Bill also amends the Working for Families tax credits package under the Income
Tax Act. Subpart 1 of the Bill adds ‘BestStart’
tax credits to the
Working for Families regime, replacing parental tax credits.
‘BestStart’ tax credits, amounting to
$60 per week, are available to
all families with new-borns for the first year of their life, and to lower
income families, including
beneficiaries, until the child turns three (with
abatement at 21 cents for every dollar earned over $79,000).
- The
Bill also increases the family tax credit and raises the abatement threshold
to
$42,700. The orphan’s benefit and the unsupported
child’s benefit rates are correspondingly increased as recipients of
these
benefits are not eligible for the family tax credit. Additionally, the Bill
increases the minimum family tax credit, which
is intended to ensure that all
beneficiaries are better off in work by topping up the after-tax income
to a set threshold. The increased threshold aligns with the targeted social
assistance increases in this Bill, such as winter energy
payments.
- Winter
energy payments provide targeted assistance to those on main benefits,
superannuation and veteran’s pensions to help
meet their household heating
costs during the winter period. Winter energy payments are set at $450 a year
for single people with
no dependents and at $700 a year for people married, in a
civil union or in a de facto relationship, and/or with one or more dependent
children. The Bill also includes transitional provisions relating to the winter
energy payment during its first year.
- The
winter energy payment is not available to recipients of a main benefit where
they are subject to a non-entitlement period, a stand
down under s 80BA, or
suspension of 100 percent of the benefit or cancellation of the benefit under ss
116, 173 or 174.
- The
winter energy payment is also not available to otherwise eligible people who are
receiving long-term residential care in hospital
or a rest home, or residential
support services which are funded in whole or part under the New Zealand Public
Health and Disability
Act 2000. People can choose to opt-out of receiving a
winter energy payment.
- The
Bill inserts a new definition for accommodation supplement purposes of the terms
Area 1, Area 2, Area 3, and Area 4. The new definition
will be set out in
regulations.
- Finally,
the Bill consequentially amends several other Acts, Regulations, and Orders
relating to the Income Tax Act and the Social
Security
Act.
Consistency of the Bill with the Bill of Rights Act
Section 19(1) – Freedom from discrimination
- Section
19(1) of the New Zealand Bill of Rights Act 1990 affirms that everyone has the
right to freedom from discrimination on the
prohibited grounds in s 21 of the
Human Rights Act 1993. The grounds of discrimination under the Human Rights Act
include marital
status, family status, and employment status which means being
unemployed or being a recipient of a benefit under the Social Security
Act or an
entitlement under the Accident Compensation Act 2001.
- The
key questions determining whether legislation limits freedom from discrimination
are:1
- does
the legislation draw a distinction on one of the prohibited grounds of
discrimination under the Human Rights Act?
- if
so, does the distinction involve material disadvantage to one or more classes of
individuals?
Social security legislation, tax
legislation, and discrimination
- Social
security legislation necessarily targets limited government assistance to those
most in need. Assistance, and obligations on
those receiving it, is then
tailored to suit individual circumstances. Eligibility for benefits, and
obligations on beneficiaries,
are
1 See, for example, Ministry of Health
v Atkinson [2012] NZCA 184, [2012] 3 NZLR 456; and Child Poverty Action
Group Inc v Attorney-General [2013] NZCA 402, [2013] 3 NZLR 729.
inherently discriminatory as they are based on drawing distinctions on many
prohibited grounds including marital status, ethnic or
national origins,
disability, age, employment status, and family status.
- As
with social security legislation, taxation legislation also makes distinctions
based on prohibited grounds under s 21 of the Human
Rights Act. Achieving a fair
and efficient tax system involves complex social policy questions, which can be
addressed in a variety
of ways. Some latitude is generally given to the
legislature to achieve its objectives, and it is a matter of legitimate policy
choice
as to where tax thresholds are drawn.
- Limitations
on rights and freedoms may still be consistent with the Bill of Rights Act if
they can be considered a reasonable limit
that is justifiable in terms of s 5 of
that Act. The s 5 inquiry may be approached as
follows:2
- does
the provision serve an objective sufficiently important to justify some
limitation of the right or freedom?
- if
so, then:
- is
the limit rationally connected with the
objective?
- does
the limit impair the right or freedom no more than is reasonably necessary for
sufficient achievement of the objective?
- is
the limit in due proportion to the importance of the objective?
- The
object of the Bill is to enact the Government’s ‘Families
Package’ which includes several measures to support
children in New
Zealand by reducing child poverty, and address income adequacy. In doing so, the
Government provides targeted financial
assistance to families with children
(i.e. based on family status) and to certain vulnerable groups of people so they
can heat their
homes during winter. Eligibility for the winter energy payment
depends on receiving a main benefit, superannuation, or a veteran’s
pension under the Social Security Act (i.e. based on employment status).
- Achieving
a fair distribution of financial and social assistance to those most in need is
a complex social policy matter. Moses J
in R (on the application of Hooper) v
Secretary of State for Work & Pensioners
stated:3
In determining how to target resources to those in need, the
legislature is entitled to impose ‘bright line’ rules which
are easy
to apply and which may not focus with precision on the merits of individual
cases... such bright line rules in the context
of social and economic policy do
not lead to incompatibility [in that case, with the European Convention on Human
Rights] even if
individual hardship is occasioned...
- As
seniors are more susceptible to winter ills and beneficiaries are on low incomes
and therefore have a higher likelihood of being
impacted by poor quality housing
stock, the winter energy payment also serves an important objective. The form of
assistance provided
is rationally connected to the Bill’s objective,
proportionate, and does not go further than reasonably necessary.
2 See Hansen v R [2007] NZSC 7,
[2007] 3 NZLR 1 at [123].
3 R (on the application of Hooper) v Secretary of
State for Work & Pensions [2002] EWHC 191 at [115] as referred to in
Howard v Attorney-General (2008) 8 HRNZ 378 at [76] – [77].
- The
‘BestStart’ tax credit serves an important objective of ensuring all
children get their best start in life by providing
all families with extra
support in the first year of a child’s life, and longer-term support for
those on low and middle incomes.
Increases to the rates and abatement thresholds
of family tax credits similarly assist families with children over families
without
children. Nevertheless, targeting assistance to families with children
is objectively connected to the purpose of the Bill, proportionate,
and does not
go further than reasonably necessary.
Differential payment based
on employment status
- Proposed
ss 61FG(2)(b) – (d) of the Social Security Act carve out exceptions from
receiving a winter energy payment for those
persons receiving a benefit who are
living in long term residential care in a hospital or rest home, or otherwise in
residential
disability support services and that care is funded in whole or in
part by the New Zealand Public Health and Disability Act 2000.
- On
its face, this discriminates against those people based on their employment
status because they are unemployed or in receipt of
a benefit under the Social
Security Act and cannot access the winter energy payment. However, as
residential care costs presumably already include heating costs, there is no
need to
pay persons receiving long term care any supplementary payment. This
category of benefit recipients will therefore not suffer material
disadvantage
if they do not receive this support.
- Maintaining
the Independent Earner Tax Credit gives preferential treatment to low income
earners in work, rather than those on benefits.
Nevertheless, this is a
justified intervention to promote income adequacy and incentivise
work.
Differential payment based on marital and/or family
status
- The
winter energy payment schedule has two payment categories based on an eligible
person’s marital or family status (whether
they have dependent
children).
- While
the payment schedule distinguishes between groups based on prohibited grounds,
this does not result in material disadvantage
because payments are broadly set
in accordance with the energy needs of these groups.
- Additionally,
and carrying over an existing feature of the Working for Families scheme,
caregivers who receive an Orphan’s Benefit,
Unsupported Child’s
Benefit or Foster Care Allowance are not able to apply for the family tax
credit. Presumably, such caregivers
are not eligible as they are already
receiving a benefit or allowance to assist in caring for dependent children. To
the extent such
caregivers are excluded from the family tax credit scheme,
however, the detriment suffered should be minimal given that the Bill
also
increases the rates of these benefits to reflect the increase in the eldest
child family tax credit rate.
Conclusion on freedom from
discrimination
- Taken
together, the Bill enacts a policy package to address complex social and
economic issues. The Bill targets assistance based
on an assessment of levels of
poverty and relative disadvantage, which may differ over time depending on
“overall political
judgment”.4
4 Child Poverty Action Group Inc v
Attorney-General [2013] NZCA 402, [2013] 3 NZLR 729 at [149].
- For
the reasons outlined above, and having regard to the degree of deference that is
appropriate when dealing with complex social
policy issues,5
we consider the Bill appears to be consistent with the right to be free
from discrimination affirmed in s 19(1) of the Bill of Rights
Act.
Conclusion
- 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
5 See, for example,
Canada (Attorney General) v JTI-MacDonald Corp [2007] 2 SCR 610 at [41]
– [43].
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