Trustee tax rate increased to 39% - With limited exceptions…

Both trusts and estates are taxed on the income they generate, the amount of tax depending on the individual circumstances.

Trusts – 33% or 39%

Trustees of a trust hold money or property for the benefit of its beneficiaries. From 1 April 2024, trusts will pay tax at a 39% tax rate on any income that is not distributed to beneficiaries, if trustee net income exceeds $10,000. For earlier years, trusts and estates were taxed at a flat 33% rate.

Note that the tax rate for trustee net income that exceeds $10,000, the total income is taxed at 39% (not just the income over and above $10,000). Also, any settlement on a trust does not count as income for tax purposes.

Deceased Estates – 33%

Estates are a person’s assets after they have died. If an estate continues to earn income while it’s being wound up, that income will be taxed at the lower rate of 33%. This will apply for all the estate’s income during the tax year the person dies, and for the next 3 years. After this period, any income will be taxed as though the estate were a trust.

Disabled beneficiary trusts – 33%

A trust set up to care for disabled beneficiaries will continue to pay tax at the 33% rate, no matter how much income it earns.

A ‘Disabled beneficiary’ means a beneficiary of the trust who receives 1 or more of the following support payments in a tax year:

• the disability allowance

• the child disability allowance

• the supported living payment (because of restricted work capacity), or

• the JobSeeker Support Health and Disability (if this has been paid for at least 6 months).

This also includes anybody over the age of 65 who would have met the ‘disabled beneficiary’ definition in the year they turned 65, or the tax year before that year.

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If you have any questions about the trust tax rate increase and how it may affect you, please contact your CT advisor.

Phone: 09 238 9219 | Email: team@ct.co.nz | Helpdesk: 0800 883 718

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This video contains general information only. You should obtain advice for your personal circumstances.