Changes to First
On 19 May 2022 the Minister of
Finance, Hon. Grant Robertson delivered New Zealand's 2022 Budget that
included changes to the following First Home products: the First Home Grant,
First Home Loan and the K?inga Whenua Loan scheme.
The changes to
the First Home Grant took effect from 19 May 2022 and the changes to the First
Home Loan and Kainga Whenua Loan took effect from 1 June 2022. Housing
Minister Dr Megan Woods ("Dr Woods") stated that: "We are increasing the house
price caps for the First Home Grant to align with lower quartile market values
for new and existing properties. This recognises the changes in house prices
over the past year,".
The Government has also removed house price caps from the First Home Loan,
this provides eligible applicants with a greater choice of properties, however
income caps and lender requirements will still apply to ensure that the First
Home Loan is being used by buyers who need support for a first home. House
price and income caps are to be reviewed every six months to ensure that they
continue to stay up to date. Changes to First Home Grant in summary:
* House price caps increased, to align with lower quartile estimated values
for new and existing properties.
* KiwiSaver contribution requirements adjusted, to reduce the threshold amount
of regular savings to access the grant.
* New income cap category introduced for 'individual buyers with dependents',
with an income cap of $150,000.
* Relocatable homes that have received a Code Compliance Certificate in the
last 12 months can qualify as new properties.
* Members of eligible Progressive Home Ownership rent-to-buy schemes can
access the grant amount for new builds.
The changes to the eligibility criteria include the introduction of a new
income cap category for individual buyers with dependents, and adjusting the
KiwiSaver contribution requirements for the First Home Grant. Dr Woods stated
that "We estimate that these changes, along with other changes to the
eligibility criteria, will help thousands more first home buyers, with funding
available for approximately 7,000 extra First Home Grants and 2,500 extra
First Home Loans available every year." Changes to First Home Loan in summary:
* House price caps removed altogether (income caps and lender requirements
still apply), to provide applicants with a greater choice of properties.
* New income cap category introduced for 'individual buyers with dependents',
with an income cap of $150,000.
Inside this edition
Changes to First Home products
Epidemic Preparedness Notice for commercial leases and mortgages
A brief summary of the Fair Pay Agreements Bill
Family Protection Act claims
Attribution vs market
under Emissions Trading Scheme
124 Queen Street, Hastings
126 Queen Street, Hastings
The Government also announced a change to the
Kainga Whenua Loan scheme, increasing the loan cap. Associate Housing Minister
(Maori Housing) Peeni Henare said this change will make a real difference for
whanau; "Unlocking funding support to help people into homes will reconnect
them with their whenua." Further that "We made a promise as a government to
change the status quo when it comes to Maori housing, and providing more
funding options for whanau looking to utilise whenua Maori as effectively as
possible is a vital part of that work,". Kainga Ora's Jason Lovell, Manager of
Home Ownership Products, says the announcement supports Kainga Ora to continue
helping more whanau into their first home. The change to the Kainga Whenua
Loan scheme in summary:
* Loan cap has increased from $200,000 to $500,000, to provide more choice and
opportunities for people building, relocating, or purchasing a home on whenua
Maori. A deposit of 15% of every dollar borrowed over $200,000 is required.
In May 2020 temporary law changes were made to the Property Law Act 2007 ("the
Act") as part of the COVID-19 Response (Further Management Measures)
Legislation Act 2020. These changes related to leases of commercial properties
and all residential and commercial mortgages; including mortgages related to
goods (e.g., Business assets other than land and buildings). These temporary
law changes are outlined below.
Commercial Leases: the period in s.245(1)(a) and s.245(3)(c) of the Act, which
was 10 working days, was extended to 30 working days. This means that a
landlord cannot exercise their right to cancel a lease due to unpaid rent of
the tenant which has been in arrears for no less than 30 working days - and if
a landlord does give notice to exercise their rights, the tenant has 30
working days after the date of service to remedy their breach. The best
approach is for all parties affected to work together productively to find a
solution that is feasible and will meet all parties needs and interests.
Mortgages: the notice period under s.120(1)(c) of the Act, which was 20
working days, was extended to 40 working days. This means that if a lender
intends to give notice under s.119 of the Act, which is giving notice to the
borrower that they are in default and outlining the action required to remedy
the default, the period that the borrower has to remedy the default is
currently not shorter than 40 working days after the date of service of the
To give a brief background to these temporary changes: the Prime Minister,
with the agreement of the Ministry of Health, utilised the special powers
provided under section 5 of the Epidemic Preparedness Act 2006 to declare that
the effects of the COVID-19 outbreak were likely to disrupt or continue to
disrupt essential governmental and business activity in New Zealand.
result of this was The Epidemic Preparedness (COVID-19) Notice 2020. An
Epidemic Preparedness Notice is something governmental agencies can use to
assist them to respond swiftly, and in this instance, to the continually
evolving COVID-19 pandemic.
Since the Epidemic Preparedness (COVID-19) Notice 2020 was first issued, it
has been reviewed every 3 months by government resulting in it being renewed
each time. It was last reviewed on 12th June 2022 and is effective from 16th
June 2022 through to 16th September 2022, when it will be reviewed again. The
next renewal review is due mid-September and will be notified to the public by
way of an official notice on
Therefore, any temporary law changes made under the Epidemic Preparedness
Notice, whilst temporary, are still in effect. If you are a landlord, you do
need to comply with the current 30 working day period until such time as the
Epidemic Preparedness Notice is not renewed and comes to an end. The same goes
for lenders having to comply with the current 40 working day period.
The Fair Pay
Agreements Bill has been drafted with the intention of providing a framework
for collective bargaining for fair pay agreements across all industries and
occupations, rather than just between unions and particular employers.
Introduced on 29 March 2022, it is currently at the Select Committee stage.
The Fair Pay Agreements Bill allows for unions and employer associations to
set standards for all other employees in an industry. The standards that can
be negotiated are base pay rates, working hours and rates for work completed
outside of working hours. Once a minimum standard has been set, employers and
employees will be able to negotiate above this standard, but employees cannot
legally be paid less that what the Fair Pay Agreement has set as the standard
rate. The current layout of the Bill allows for the terms of the agreement to
be valid for three years with renegotiation possible after this period.
Fair Pay Agreement negotiations are triggered by either a union beginning to
bargain if they have the agreement of either 10% of a workforce or 1000
employees, or unions can meet a "public interest test". Unions can agree to
either an occupational Fair Pay Agreement or an industry one. Fair Pay
Agreement bargaining will receive a government provided bargaining support
person, as well as training. The government also will contribute up to $50,000
per bargaining side, which has been calculated based on four Fair Pay
Agreements a year.
Unions will directly update employees, while employers must allow employees to
attend two 2-hour paid meetings for Fair Pay Agreement bargaining. The
Employment Relations Authority will review a Fair Pay Agreement to ensure
everything is lawful before it is taken to a vote. In order for a proposed
Fair Pay Agreement to be ratified, it will need the support from the majority
of both employees and employers. Employers will be given one vote per
employee; however, a higher vote weight will be given to those employers with
fewer than 20 employees. Once the vote has been carried out, MBIE will create
secondary legislation to enact the Fair Pay Agreement so that it can cover all
employees in an industry or occupation.
As the Bill is currently at the Select Committee stage, amendments to the Bill
will be considered with the Select Committee due to report to Parliament early
October 2022. Once the Bill has passed, it is anticipated that the Fair Pay
Agreement process will commence at the end of 2022.
By way of introducing Fair Pay Agreements, the wages of those on low to medium
incomes will be lifted, working conditions will be set at a better standard,
and those working overtime, overnight and on public holidays will be able to
negotiate fairer terms for doing so.
The Family Protection Act ("the Act") is utilised by certain
classes of family members who have an issue with the extent of their
inheritance; either due to being left out entirely or where they perceive the
share received is less than what is reasonable and fair because the deceased
has breached their moral duty to that person to adequately provide for their
maintenance and support.
An application is made to either the Family Court or the High Court. That
said, there are only a limited class of people that can make a claim under the
1. a spouse or civil union partner;
2. a de facto partner who was living with the deceased at the time of death;
3. children of the deceased;
4. grandchildren of the deceased;
5. stepchildren; and
6. parents of the deceased.
There are of course some parameters to each of these classes of people who may
wish to bring a claim against an estate. Claims can be settled informally with
the help of lawyers via negotiation, however, some claims will end up in the
The courts will consider whether there has been a breach by the deceased of
their moral duty towards the class of person/persons making the claim and then
what, if any, monetary award will be made from the estate to repair such
breach. Of course, each case will vary greatly and any awards will be based on
the facts of the case; and the courts have a fairly wide discretion given the
variety of case law in this area.
Focusing only on the category of persons 1 to 3 above: there is a requirement
for the applicant to establish that there has been a failure to provide for
their maintenance and support under the deceased's will. It will then be
assessed whether the claim is for both maintenance and support or just
If you wish to make a claim, it must be filed in the courts
within 12 months of the grant of probate. There are a number of forms to be
completed, namely a notice of proceeding, statement of claim, affidavit of the
applicant in support of the claim and 'ex parte application' for directions as
to service and for representation. A lawyer will assist you drafting these in
accordance with the specific High Court rules.
Whilst we can never fully protect an estate from having a claim made against
it; we can try to limit the fallout from any claim made. As a will maker, it
is best to remember your moral duty to provide for your family members.
Careful consideration should be given to the circumstances of a situation
where you may wish to leave someone out of your will; remembering that they
could bring a claim against your estate under this Act. Some will makers
consider leaving something, rather than nothing, which could be considered as
fulfilling your moral duty and rebuking a claim against your estate. You can
also make a written explanation of why your estate has been left to certain
people (and not others) and keep this in your deeds with your will.
For more information on the class of people 4 to 6, please contact your lawyer
direct as each category has specific rules and restrictions relating to them.
The introduction of the 39% tax rate for individuals who earn
over $180,000 from 1 April 2021 has reignited Inland Revenue's interest in the
income attribution and market salary regimes. These rules currently prevent a
person from having income earnt from individual efforts or "personal services"
taxed through an associated entity at a lower tax rate. With an 11% difference
between the top individual tax rate and the NZ company tax rate, the
application of these rules is likely to be closely scrutinised in upcoming
The attribution rules will generally apply when a taxpayer who earns income of
more than $70,000 from personal services inserts an associated entity between
themselves and the party acquiring their services. These rules do not strictly
apply if the associated entity derives income from numerous, unrelated
parties, provided one party does not make up 80% or more of the entity's
For example, compare the two scenarios:
1. Paul contracts Sarah Limited for $200,000 - all the services are performed
by Sarah, and Paul is Sarah Limited's only client.
2. Four non-associated individuals: Paul, Eugene, Rebecca and John, each
contract Sarah Limited for $50,000 each - all the services are performed by
The income attribution rules would only apply to scenario 1 above, forcing
Sarah to return all of Sarah Limited's net income in her personal tax return.
However, in the second scenario, although the income
attribution rules do not apply, the market salary principles still need to be
considered to determine the amount of income to return in Sarah's personal tax
The Supreme Court established the leading precedent in the case of Penny &
Hooper v Commissioner of Inland Revenue (2009) that a failure to pay a
"commercially realistic salary" for services rendered is an important
consideration in determining whether an arrangement amounts to tax avoidance.
Revenue Alert 21/01, released on 29 March 2021 ahead of the increase in the
top marginal tax rate, also provides further guidance, and states that Inland
Revenue is more likely to examine arrangements where the salary paid from an
entity to an associated working individual is less than 80% of the entity's
net income. While this is not a legislated de minimis rule, it suggests it is
unlikely Inland Revenue will challenge the amount of an individual's salary if
the 80% threshold is met. On the other hand, not meeting the threshold should
not automatically amount to tax avoidance.
Both the attribution and market salary regimes should be kept in mind when
determining salary levels. People don't often appreciate that there is both a
specific set of income attribution provisions to consider and a separate
market salary principle as per 'Penny & Hooper'.
Emissions Trading Scheme
As climate change
issues come more clearly into focus, so do the relevance and effects of the
Emissions Trading Scheme (ETS). If you are in the ETS, or are buying or
currently own a property that has trees that are affected by the rules and
regulations surrounding the ETS, then you definitely need to be vigilant.
There is no doubt that combined assistance is required from your lawyer and
accountant alongside the consultants that are at the coalface implementing and
administering the ETS.
1990 is a key year with regard to the ETS. Forests planted before 1st January
1990 cannot be counted as additional carbon storage under the ETS, they are
part of the baseline emissions and removals, and cannot be registered to earn
units for carbon storage. This means that should an owner of such trees cut
them down and change the land use (i.e., not replant the relevant area with
new trees) without being granted an exemption or offset, the owner would then
pay for any emissions that are created from the deforestation. The effect is a
line drawn which can hugely discourage excess deforestation. Realistically,
only forestry use is appropriate for those lands. On the other side of the
coin, trees planted after the 31st December 1989 are entitled to be in the ETS
with the pluses and minuses it has to offer.
There are offsets and flexibility. The rights of the pre and post 1990
landowners are starkly different. Caution is paramount. Understanding of
long-term plans within the area and their implications are crucial. In many
instances, the same rural land being sold may house trees whose planting dates
straddle the 1989-1990 guideline.
The ETS has become entrenched, with 1st January 1990 being the unbending
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One of the
clearly defined and longstanding requirements regarding the sale and purchase
of land in New Zealand is that the agreement must be in writing and signed by
both the accurate seller and purchaser.
When the seller of the land uses a real estate agent to assist with the sale,
that agent is the seller's
agent. Under the law of agency, any representation made by the agent is deemed
to be on behalf of their seller principal. However, within the parameters of
the selling of land process outlined above there are opportunities for
slip-ups to occur.
If a misrepresentation, made by the seller or their agent, occurs between the
commencement of the marketing program and the signing of an agreement for sale
and purchase document, then an issue may arise where what is purported to be
on sale, is not totally reflected in the written agreement.
The facts are very important here. The misrepresentation made must directly
affect the purchaser's
decision to buy the land. If the chain of causation is broken between the
making of any misrepresentation (either verbally or in writing) and the
signing of the written agreement, then the claim would fail. The test is that
the purchaser made the decision to buy, with the misrepresented facts being
part of the marketing facts presented
which were not amended, clarified or rectified along the way.
If any issues arise in this area, it is advised to obtain legal advice as soon
as possible; whether you are a seller or a buyer. Time frames apply and
everyone involved needs to be put on notice.
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