Trusts

A trust is a creation of the law of equity and is not a legal entity distinct from its trustee. Instead, a trust is a fiduciary relationship where a trustee holds property for the benefit of beneficiaries or, where the trust is a charitable trust, for the specified charitable purposes. Although the trustee has legal ownership of the trust property, they hold it subject to the beneficial interests of the beneficiaries and must act in accordance with the terms of the trust and the Trusts Act 2019.

The Commissioner has published various items on income tax, GST and disclosure issues involving trusts. This overview sets out these items organised by the following headings:

General principles
Disclosure requirements
Beneficiaries
Short-stay accommodation
DTAs
Avoidance
GST

The Commissioner issues different types of guidance items to cater for different customer needs. The different types of items are explained on About our publications.

General principles

Title	Summary	Date issued
Taxation of trusts IS 24/01	This IS explains the taxation of trusts under the trust rules in the Income Tax Act 2007. It also explains the compliance obligations on settlors, trustees and beneficiaries under tax law.	1 Feb 2024
Tax residence IS 16/03	This IS sets out the Commissioner's view on tax residence. Part 3 explains how these rules apply to trusts.	20 Sept 2016

Title

Summary

Date issued

Taxation of trusts

IS 24/01

This IS explains the taxation of trusts under the trust rules in the Income Tax Act 2007. It also explains the compliance obligations on settlors, trustees and beneficiaries under tax law.

1 Feb 2024

Tax residence

IS 16/03

This IS sets out the Commissioner's view on tax residence. Part 3 explains how these rules apply to trusts.

20 Sept 2016

Disclosure requirements

Title	Summary	Date issued
Reporting requirements for domestic trusts OS 22/02	This OS sets out the Commissioner’s approach to applying the trust information gathering powers contained in section 59BA and section 59BAB of the Tax Administration Act 1994.	6 Apr 2022

Title

Summary

Date issued

Reporting requirements for domestic trusts

OS 22/02

This OS sets out the Commissioner’s approach to applying the trust information gathering powers contained in section 59BA and section 59BAB of the Tax Administration Act 1994.

6 Apr 2022

Beneficiaries

Title	Summary	Date issued
Distributions from foreign trusts IS 19/04	This IS considers the income tax treatment of money or property transferred to New Zealand-resident taxpayers by a person overseas, including through inheritance. It explains how to determine whether the person who transfers the money or property is a trustee of a trust and when a taxpayer will have derived either beneficiary income or a taxable distribution from a foreign trust.	1 Feb 2020
Whether income deemed to arise under tax law but not trust law, can give rise to beneficiary income. IS 12/02	This IS considers whether income deemed to arise under tax law, but not trust law, can give rise to beneficiary income under s HC 6 of the Income Tax Act 2007.	1 Aug 2012
Whether the minor beneficiary rule exemption applies on a $1,000 "per beneficiary" or on a $1,000 "per beneficiary per trust" basis. QB 07/02	This QWBA clarifies the application of the minor beneficiary rule exemption under s HH 3B of the Income Tax Act 2004 (s HC 35(4)(a) of the Income Tax Act 2007).	1 May 2007

Title

Summary

Date issued

Distributions from foreign trusts

IS 19/04

This IS considers the income tax treatment of money or property transferred to New Zealand-resident taxpayers by a person overseas, including through inheritance. It explains how to determine whether the person who transfers the money or property is a trustee of a trust and when a taxpayer will have derived either beneficiary income or a taxable distribution from a foreign trust.

1 Feb 2020

Whether income deemed to arise under tax law but not trust law, can give rise to beneficiary income.

IS 12/02

This IS considers whether income deemed to arise under tax law, but not trust law, can give rise to beneficiary income under s HC 6 of the Income Tax Act 2007.

1 Aug 2012

Whether the minor beneficiary rule exemption applies on a $1,000 "per beneficiary" or on a $1,000 "per beneficiary per trust" basis.

QB 07/02

This QWBA clarifies the application of the minor beneficiary rule exemption under s HH 3B of the Income Tax Act 2004 (s HC 35(4)(a) of the Income Tax Act 2007).

1 May 2007

Short-stay accommodation

Title	Summary	Date issued
The interest limitation rules and short-stay accommodation IS 23/04	This IS considers how the interest limitation rules apply to interest incurred for property used to provide short-stay accommodation. It explains how the rules apply to natural persons and trustees only.	2 Jun 2023
Application of the land sales rules to co-ownership changes and changes of trustees IS 22/03 and fact sheet	This IS considers whether the land sale rules in the Income Tax Act 2007 apply to changes to co-ownership of land and changes of trustees of a trust.	14 Jun 2022
If property held in a trust is rented out by a beneficiary of the trust for short-stay accommodation, who should declare the income, and what deductions can be claimed? QB 19/15	This QWBA explains how the income tax rules apply if short-stay accommodation held in a trust is rented out by a beneficiary of the trust.	19 Dec 2019
If property held in a trust is rented out by the trustees for short-stay accommodation, who should declare the income, and what deductions can be claimed? QB 19/16	This QWBA explains how the income tax rules apply if short-stay accommodation held in a trust is rented out by the trustees of the trust.	19 Dec 2019

DTAs

Title	Summary
Trusts and the Australian-New Zealand Double Tax Agreement (DTA) IRRUIP15	This issues paper examines if a trust can access the benefits under the DTA and how residency is determined for a trust. It then explores the DTA’s accommodation of trusts as fiscally transparent entities to understand exactly what that means in the Trans-Tasman context for both trustees and beneficiaries. Finally, there is an analysis of the credit allowance provisions that provide relief for tax paid in the other jurisdiction.	18 Dec 2020

Title

Summary

Trusts and the Australian-New Zealand Double Tax Agreement (DTA)

IRRUIP15

This issues paper examines if a trust can access the benefits under the DTA and how residency is determined for a trust. It then explores the DTA’s accommodation of trusts as fiscally transparent entities to understand exactly what that means in the Trans-Tasman context for both trustees and beneficiaries. Finally, there is an analysis of the credit allowance provisions that provide relief for tax paid in the other jurisdiction.

18 Dec 2020

Avoidance

Title	Summary
Proposed increase in the trustee tax rate to 39% GA 24/01	This article provides guidance on how Inland Revenue may view some taxpayer transactions and structural changes regarding the proposed increase in the trustee tax rate.	2 Feb 2024
Scenarios on tax avoidance QB 23/02	This QWBA considers whether the general anti-avoidance provisions apply in different scenarios. Scenario 2 concerns the use of a discretionary trust.	3 Feb 2023
Diverting personal services income through a related entity such as a trading trust RA 21/01	Inland Revenue is concerned about arrangements where taxpayers divert income they earn (or could earn) from a personal services business to a related entity like a trading trust, to take advantage of lower marginal income tax rates.	29 Mar 2021

Title

Summary

Proposed increase in the trustee tax rate to 39%

GA 24/01

This article provides guidance on how Inland Revenue may view some taxpayer transactions and structural changes regarding the proposed increase in the trustee tax rate.

2 Feb 2024

Scenarios on tax avoidance

QB 23/02

This QWBA considers whether the general anti-avoidance provisions apply in different scenarios. Scenario 2 concerns the use of a discretionary trust.

3 Feb 2023

Diverting personal services income through a related entity such as a trading trust

RA 21/01

Inland Revenue is concerned about arrangements where taxpayers divert income they earn (or could earn) from a personal services business to a related entity like a trading trust, to take advantage of lower marginal income tax rates.

29 Mar 2021

GST

Title	Summary
GST treatment of distributions made by a trading trust to a beneficiary IS 18/02	This IS considers the GST treatment of a distribution made by a GST-registered trading trust to a beneficiary, where that distribution consists of goods forming part of the trust’s taxable activity. It also considers situations where supplies may trigger obligations on the trading trust to register for or deregister from GST.	24 Jul 2018
GST treatment of bare trusts QB 16/03	This QWBA considers whether it is the trustee or the beneficiary of a bare trust who makes supplies in respect of the trust property for GST purposes.	27 Apr 2016
Does a separate trustee capacity and personal capacity exist and do separate trustee capacities exist for trustees of multiple trusts? QB 07/03	This QWBA discusses 'associated persons' and whether a person acting as a trustee of a trust is acting in a different capacity from that of personal capacity.	28 Jun 2007

Title

Summary

GST treatment of distributions made by a trading trust to a beneficiary

IS 18/02

This IS considers the GST treatment of a distribution made by a GST-registered trading trust to a beneficiary, where that distribution consists of goods forming part of the trust’s taxable activity. It also considers situations where supplies may trigger obligations on the trading trust to register for or deregister from GST.

24 Jul 2018

GST treatment of bare trusts

QB 16/03

This QWBA considers whether it is the trustee or the beneficiary of a bare trust who makes supplies in respect of the trust property for GST purposes.

27 Apr 2016

Does a separate trustee capacity and personal capacity exist and do separate trustee capacities exist for trustees of multiple trusts?

QB 07/03

This QWBA discusses 'associated persons' and whether a person acting as a trustee of a trust is acting in a different capacity from that of personal capacity.

28 Jun 2007