MPs' property loophole 'stings taxpayers'

By Jared Savage, Claire Trevett, Keith Ng

In the first of a three-part series, a Herald investigation of politicians' property records finds six Govt MPs are using their private Super funds to own properties that do not need to be disclosed, claiming up to $78,000 a year to pay off mortgages

Minister Simon Bridges said the properties were in his Super fund for genuine investment reasons. Photo / Glenn Taylor
Minister Simon Bridges said the properties were in his Super fund for genuine investment reasons. Photo / Glenn Taylor

A loophole where MPs do not need to disclose investment properties owned in superannuation schemes - and claim up to $78,000 in taxpayer-funded subsidies each year - is "stinging taxpayers in the pocket", according to a Government lobby group.

A Herald investigation of property records for all 121 members of Parliament has discovered that six National MPs use their private superannuation schemes to own property that does not need to be disclosed - unlike assets held in trusts. This is because of an exception in the rules of the Register of Pecuniary Interests.

Read more about how the Herald discovered the MPs' property investment loophole.

All six - Chester Borrows, Simon Bridges, Anne Tolley, Chris Auchinvole, Peseta Sam Lotu-Iiga and Mike Sabin - live in the Wellington properties while working in the capital and claim the accommodation allowance or expenses.

Ministers get a flat annual fee of $37,500 ($720 a week) while backbench MPs can claim up to $24,000 in accommodation expenses.

The newly formed Taxpayers' Union, set up to "give Kiwi taxpayers a strong voice in the corridors of power", said it was shocked that the MPs were told to remove the relevant properties from their respective declaration of pecuniary interests.

Executive director Jordan Williams said the Registrar of Pecuniary Interests, which was Dame Margaret Bazley at the time, should ensure the public is fully informed.

"We are shocked that she has advised Ministers to withhold information, contrary to the purpose of the register.

"Today's revelations show that the MPs' Register of Pecuniary Interests is unfit for purpose and needs to be amended. These entitlements are stinging taxpayers in the pocket. There is no excuse for not ensuring that there is full transparency."

By owning the property in a private superannuation scheme, the politicians can also use their taxpayer-funded superannuation subsidies to pay off the mortgage.

For every $1 placed in the private schemes by the MP, the taxpayer contributes $2.50 to a maximum of $28,920 - an annual superannuation total of up to $40,488.

Combined with the taxpayer-funded accommodation allowances, a minister like Mrs Tolley could pay off up to $77,988 of the mortgage each year while also making a capital gain as the property's value increases.

- John Key: 'Cut MPs some slack' -

Prime Minister John Key said today the MPs needed to be "cut some slack'' over the property loophole because they were following the rules.

He defended the parliamentarians, saying it was the way the system was established that meant they were told not to declare their assets.

"As it says in the paper, they were actually advised not to [declare]. They said, 'we want to do this, we've got nothing to hide','' he said.

"I mean, it's all in the public domain, and actually what's ended up happening is they've told them, 'no you can't do that'.''

He denied it was an administrative error but was simply the rules of declaring pecuniary interests.

Mr Key told TV One's Breakfast programme that MPs could not list all the assets in a trust because it disrupted trust law.

"So it's the way these things are established, because what effectively they're doing, is owning the property they live in through their superannuation fund, and there's nothing actually terribly new about that, that's happened for time immemorial,'' he said.

He added: "These guys have got to follow the rules, because if they don't follow the rules they can be hung, drawn and quartered. But if they follow the rules maybe you've got to cut them that slack.''

Mr Key said his Government had "actively sought to be much more transparent''.

As well as the six MPs with Wellington properties in Super funds, a further 26 MPs who get accommodation allowances also have properties in Wellington which are disclosed on the register. Nineteen are National MPs and four are from Labour. The others are the two Maori Party co-leaders and NZ First's Denis O'Rourke.

- Bridges: I was told not to disclose -

Of the six with undisclosed properties held in their Super schemes, Mr Bridges, Mr Sabin and Mr Auchinvole all said they would have no problem with disclosing the properties, but had been advised by the Registrar for Pecuniary Interests not to do so.

Mr Bridges said the properties were in his Super fund because of genuine investment reasons, not to hide them away. He had listed both the Wellington and Parnell properties in his initial return, but was given clear advice to take them out.

"If I'd forced the issue to put them down, I'm sure I could have, but if the rules don't provide for that or don't require that, my role in this is to comply with the rules and not more."

He bought the apartment after becoming a minister because of the extra time he had to spend in Wellington. "It literally is my superannuation scheme. Like a lot of New Zealanders, it's my way of having something for the future."

Before that he had stayed in a hotel while in Wellington.

Mr Sabin said he set his up because he did not have KiwiSaver, and a personal scheme gave him greater flexibility. He had bought an apartment rather than staying in hotels because he had to spend four nights a week in Wellington due to the travelling time from his Northland home.

He said the Registrar of Pecuniary Interests had instructed them not to disclose properties in Super schemes.

"I have no problem declaring it for what it is. I'm happy to comply with any determination of the authority, but they set the requirements, not I."

Mr Auchinvole said he believed it was appropriate to put the property in his Super trust, but said the intention was to give him a Wellington base, rather than to benefit from capital gains.

"If it had been for capital gain, it would have been a disappointment."

Mr Bridges also had a property in Karikari in his name, but explained he was a trustee for a friend and had no financial interest in it, so had not disclosed it.

When told a rule clarification in 2011 meant MPs had to list all trusts they acted as trustees for, whether or not they had a beneficial interest, he said he would put in a late disclosure of his role as a trustee.

Mr Lotu-Iiga said his apartment was a superannuation investment. He had had it for about four years and stayed there when in Wellington. "It's part of my Super fund - the way it's been invested."

He too said he did not have a problem with disclosing it, but was advised not to.
Mr Borrows said he was a beneficiary of the Super trust he established which owned his Wellington apartment. He said the arrangement made no difference to the amount he got in accommodation allowance as a minister, and in fact he was on the lower payment of $30,000 because it was the same flat he stayed in as a backbench MP.

"If I had changed accommodation this would cost the taxpayer another $7000 per annum if I was renting, in a hotel, or paying a mortgage myself. As an out-of-Wellington MP, an accommodation allowance is payable regardless of the situation and I receive the lowest rate."

Mrs Tolley would not say why she put her property into a Super scheme or if she still stayed in her apartment in Wellington or rented it out, saying simply that she had abided by the legal requirements for the register.

Although most of the six MPs said they had been advised not to disclose the property in their Super schemes, other MPs have disclosed assets.

Labour's Chris Hipkins has listed a rental property in Paraparaumu as owned by his super trust, and Labour's finance spokesman, David Parker, has listed share ownership and a property in Alexandra, which are held in his personal Super trust.

The Green Party was criticised in 2009 - before the rules changed - after it was discovered its Super fund owned two properties which were rented by Green MPs, who then claimed the accommodation allowance. The $48,000 claimed for both properties was then channelled back into the superannuation fund.

The party apologised and repaid $6000 when it was revealed that two MPs, Catherine Delahunty and Jeanette Fitzsimons, each claimed $500 a week to live in the same house - about double the market value.

Co-leader Metiria Turei later announced the sale of both Super fund properties, saying the Green Party wished to clear up all the public confusion that existed around allowances and expenses.

• Click here to see what MPs have and have not disclosed on the Register of Pecuniary Interests.








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