“Only a small proportion of trusts will pay most of the additional tax,” Revenue Minister David Parker said. Income subject to the trustee rate leapt from $11.4b in the 2020 tax year to $17.1b in the 2021 year, indicating tax minimisation through the use of trusts was an immediate response from taxpayers. Some businesses also run income through trusts and the tax change could be problematic for those who were already paying tax at the company level. “Not addressing other distortions in the tax system confirms that this Government, like others before it, has put broader issues with the tax system in the too-hard basket.”īDO tax partner Alan Scott said some middle-income New Zealanders could get caught and have to look at how their trusts were organised.

However, she says the fact that only a small number of trusts will pay the majority of the tax “will be of little comfort to the significant number of trusts held by ‘regular New Zealanders’ with a marginal tax rate of 33 per cent or lower”. Walker notes that the official Budget press release suggests the change won’t materially impact most trusts. And the trust deed will quite possibly certify that you can’t make distributions or you can only make certain distributions.” “The thing is the beneficiaries might be children, or could be a whole range of beneficiaries.

Now, she said, unless the income was distributed to a beneficiary, it would be taxed at the trustee rate of 39 per cent. “The whole point of the trust disclosure rules was really to gather evidence about how trusts were being used and you’d think by now there would be insights in terms of how much they are being used by the ‘super rich’ versus ordinary people just doing ordinary things just because New Zealand has developed this obsession with having a family trust.”

The crossfire series