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New Zealand finance bill amending trusts’ tax treatment

New Zealand has introduced a further finance Bill in order to ease economic recovery after the global pandemic crisis. The Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Bill will include measures aimed at deterring speculative investment in land, also amending several rules regarding trusts’ tax treatment. In particular, for what concerns the latter:

  • from 1 April 2020, a beneficiary of a trust who at the end of an income year is owed more than NZD25,000 by the trustee will become a settlor of the trust, unless interest at the market rate has been paid on the loan;
  • trustees of a trust whose settlor has migrated to New Zealand may distribute accumulated trustee income to a beneficiary as exempt income, if the trustee has met their New Zealand tax obligations either by voluntary disclosure or by an election to pay tax on world-wide trustee income;
  • income derived by a minor beneficiary of a trust is no longer exempt from income tax, and the trustees are now required to pay tax on the beneficiary’s behalf. This provision is backdated to May 2012, but a savings provision will apply for people who took a tax position relying on the current law in a tax return already filed.

SOURCE: Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Bill