The Trust Tax Rate Has Increased to 39% From 1st April 2024

From the 1st April 2024, the trust tax rate has increased from a flat rate of 33%, to a flat rate of 39%. This is on any income retained in the trust and not distributed to beneficiaries.​

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However, there are a few exemptions:​

Exemption 1: if your trust income is less than $10,000​

If your trust earns $10,000 or less in a tax year, and this income is retained in the trust and not distributed to beneficiaries, you will only pay tax at 33%. However, if your trust earns any more than $10,000, you need to pay at a rate of 39%.​

Exemption 2: the estate of someone who has died​

If an estate continues to earn income while it’s being wound up, that income will continue to be taxed at 33%. This rate will apply for all estate’s income during the tax year the person dies and for the next 3 years. After 3 years, any income will be taxed as though it is a trust at 39%.​

Exemption 3: disabled beneficiary trusts​

If you settled your trust to care for disabled beneficiaries, then it will continue to pay tax at the 33% tax rate, no matter how much it earns. ​

The IRD characterises a 'Disabled beneficiary' as an individual who, within a given tax year, is the recipient of one or more of the following governmental support payments: 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).​

Disabled beneficiaries also include 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.​

Your trust can qualify for this 33% tax rate if it cares for more than 1 disabled beneficiary, but not if it has any beneficiaries who do not meet the definition.​

Exemption 4: Energy Consumer Trusts or Lines Trusts ​

These are a special type of trust that deals with electricity distribution. These are taxed at 33%.​

Exemption 5:  Legacy Superannuation Funds​

Some superannuation funds pay tax at 28%.​

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If you’d like to read more on this topic, you can read IRD’s fact sheet, or contact us at support@beany.nz for more information.​