Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill

27 October 2009
ATTORNEY-GENERAL LEGAL ADVICE
CONSISTENCY WITH THE NEW ZEALAND BILL OF RIGHTS ACT 1990:
TAXATION (ANNUAL RATES, TRANS-TASMAN SAVINGS PORTABILITY, KIWISAVER, AND REMEDIAL MATTERS) BILL

1.   We have considered whether the Taxation (Annual Rates, Trans-Tasman Savings
Portability, KiwiSaver, and Remedial Matters) Bill (IRD 14042, IRD 13065/2.0, PCO
1111) (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 Business Committee on 2 November 2009.
^2.   ^In ^our ^view, ^the ^Bill ^appears ^to ^be ^consistent ^with ^the ^rights ^and ^freedoms ^affirmed
in the Bill of Rights Act. In reaching this conclusion, we considered a potential issue of consistency with section 19(1) of that Act (freedom from discrimination).
3.   The Bill will amend the Income Tax Act 2007, Tax Administration Act 1994, KiwiSaver Act 2006, Goods and Services Tax Act 1985, Estate and Gift Duties Act 1968, Income Tax Act 2004 and Local Government Act 2002.  While the Bill makes a large number of amendments, the only amendments raising Bill of Rights issues are the ones providing certainty and clarity on how under 18 year olds can enrol in KiwiSaver.

CONSISTENCY WITH SECTION 19 OF THE BILL OF RIGHTS ACT

4.   Section 19(1) of the Bill of Rights Act protects the right to freedom from discrimination on the grounds set out in section 21 of the Human Rights Act 1993. These grounds include age (which means any age of 16 years old and over).
5.   Taking into account the various domestic and overseas judicial pronouncements as to the meaning of discrimination, the key questions in assessing whether discrimination under section 19(1) exists are:
i.	Does the legislation draw a distinction based on one of the prohibited grounds of discrimination; and if so
ii.	Does the distinction involve disadvantage to one or more classes of individuals?
6.   If these questions are answered in the affirmative, we consider that the legislation gives rise to a prima facie issue under section 19(1) of the Bill of Rights Act.
^7.   ^Where ^a ^provision ^is ^found ^to ^be ^prima ^facie ^inconsistent ^with ^a ^particular ^right ^or
freedom, it may nevertheless be consistent with the Bill of Rights Act if it can be considered a reasonable limit that is justifiable in terms of section 5 of that Act. The section 5 inquiry is essentially two-fold: we consider whether the provision serves an important and significant objective, and whether there is a rational and proportionate connection between the provision and the objective. [1]

Opting into KiwiSaver by persons under 18

8.   The KiwiSaver Act 2006 currently does not prescribe who can contract with a provider on behalf of an under 18 year old.  It is at the discretion of the provider whether or not an application is accepted.  New section 35 would clarify how persons under 18 would opt into KiwiSaver.
^9.   ^New ^section ^35 ^states:

(1) A person who is less than 18 years may only opt in in accordance with this section.

(2) A person who is less than 16 years may opt in if their guardian contracts directly with a provider, in the name of the person. If the provider accepts the person, then the person is treated as––

(a) contracting directly with the provider:

(b) 18 years for the purposes of the Minor’s Contracts Act 1969:

(c) opting in under section 34(1)(a).

(3) A person who is 16 or 17 years old with a guardian may opt in if the person and their guardian jointly contract directly with a provider, in the name of the person. If the provider accepts the person, then the person is treated as––

(a) contracting directly with the provider:

(b) 18 years for the purposes of the Minors’ Contracts Act 1969:

(c) opting in under section 34(1)(a).

(4) A person who is 16 or 17 years old with no guardian may opt in if the person contracts directly with a provider. If the provider accepts the person, then the person is treated as––

(a) 18 years for the purposes of the Minors’ Contracts Act 1969:

(b) opting in under section 34(1)(a).

10. New section 35(3) draws a distinction between persons who are aged 16 and 17 years old and who may only opt in jointly with their guardian (unless they have no guardian), and persons aged 18 years or older who do not require their guardian to opt in.  The result is that 16 and 17 year olds may not be able to access KiwiSaver if their guardian does not consent.

Is this a justified limitation under section 5?

11. The KiwiSaver scheme was established to encourage in individuals a long-term savings habit and asset accumulation with the aim of increasing individuals' well being and financial independence, particularly in retirement.
12. There are two reasons for the joint opt in provisions of new section 35(3). The first reason is to avoid creating an incentive for those aged 16 and 17 to unilaterally leave educational training and enter the workforce to obtain the benefits of the KiwiSaver scheme.  Second, a KiwiSaver scheme is a long-term financial commitment and it is appropriate to have a guardian involved in a young person’s decision to opt in to the scheme.
^13. ^In ^practice, ^there ^is ^a ^minimal ^disadvantage ^by ^a ^16 ^or ^17 ^year ^old ^having ^to ^jointly
opt in with their guardian.  A young person would likely benefit from the involvement of a guardian in decisions about long-term savings habits.  In addition, new section 35(3) prevents the guardian from unilaterally making decisions about
the young person’s involvement in KiwiSaver.  It remains the case, however, that the
young person’s personal financial autonomy is circumscribed by the provision.
14. Any disadvantage created by new section 35(3) is outweighed by the positive aspects of the provision.   New section 35(3) represents an appropriate change over time in the financial independence of a young person and does not stigmatise on the basis
of age.  In addition, both the guardian and the young person will be aware that the provision is temporary in nature and it foreshadows the financial independence of the young person that will happen in due course.
15. We also recognise that Parliament may be afforded a wide margin of appreciation in the area of social and economic policy, including taxation, unless the policy is manifestly unreasonable. [2]
^16. ^We ^consider ^that ^new ^section ^35(3) ^is ^rationally ^and ^proportionately ^connected ^to ^its
objective and is therefore justified in terms of section 5 of the Bill of Rights Act.
17. 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

Footnotes:

1. In applying section 5, we have had regard to the guidelines set out by the Supreme Court in Hansen v R [2007] NZSC 7; the Court of Appeal in Ministry of Transport (MOT) v Noort [1993] 3 NZLR 260, Moonen v Film and Literature Board of Review [2000] 2 NZLR 9 and Moonen v Film and Literature Board of Review [2002] 2 NZLR 754; and the Supreme Court of Canada's decision in R v Oakes (1986) 26 DLR (4th).

2. Walker v United Kingdom (ECHR) (Application no 37212/02), Pearson v United Kingdom
(ECHR) (Application no 8374/03), Barrow v United Kingdom (ECHR) (Application no
^42735/02).

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 (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) 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.