In the 2025 tax year, the income of trusts and estates from filed IR6 returns totalled $14.5 billion. This is a decrease of 69.9% since the 2024 tax year.
Graph of income of trusts and estates IR6 returns
Over the period 2001 to 2023 tax years, trusts and estates have typically received between 40% and 70% of their income as imputed dividends from companies. Much of the volatility in trustee income is because of volatility in dividends paid by companies to their shareholders.
Between the 2001 to 2010 tax years, trustee income grew by 420% ($8.3 billion). The growth in income was driven by both an increase in the volume of trusts filing returns and by the aggregate value of dividends received. The trustee tax rate at 33% was also lower than the 39% top personal tax rate in that decade. This affected the allocation between trustees and beneficiaries with a preference for the growth to be in trustee income and not beneficiary income.
In the 2009 tax year the company tax rate dropped from 33% to 30%. The company tax rate dropped again in the 2012 tax year to 28%. Following both changes to the company tax rate, companies could attach imputation credits to dividends with reference to the higher preceding company tax rates for an additional two years. The changes in the company tax rate and the ability to impute dividends at a higher rate for a short period resulted in a spike in trustee income in the 2010 and 2013 tax years as companies temporarily increased their dividend payments to their shareholders. Trustee income dropped substantially in the tax years following these higher dividend payments (2011 and 2014 tax years) as firms adjusted their dividend distributions after the higher pay-outs in the preceding years. It also dropped more generally after 2010 relative to the previous decade after the 39% personal tax rate was removed from October 2010. In the subsequent decade, beneficiary income began to capture a larger share of the growth in income passing through trusts.
From 1 April 2021 (the 2022 tax year), the personal income tax scale changed again with the reintroduction of a higher personal tax rate of 39%, this time for people with incomes exceeding $180,000. The increase in trustee income in the preceding 2021 tax year reflects high profitability but also high dividend payouts in that year by companies owned by trusts in advance of the higher personal tax rates taking effect. The increase in dividends received by trusts was generally taxed at the trustee income tax rate of 33% with the relative amount of income allocated to trustees (rather than beneficiaries) increasing from 62% in 2020 to 71% in 2021.
From 1 April 2024 (the 2025 tax year), the trustee rate for non-estate trusts earning more than $10,000 in trustee income was increased to 39%. In advance of this change in the 2024 tax year, trustee income increased sharply to $41.5 billion, while income allocated to beneficiaries increased to $6.8 billion. The share of trust income allocated to trustees increased from 74% in 2023 to 86% in 2024, while the share allocated to beneficiaries decreased from 26% to 14%.
The increase in trustee income in the 2024 tax year was a result of a behavioural change in dividend flows from companies to their trusts owners. In the following 2025 tax year, trustee income fell by 84% to $6.7 billion from an 85% reduction in dividend income. At the same time, income allocated to beneficiaries increased by 16.5% to $7.9 billion in the 2025 tax year. As a result, the share of trust income allocated to trustees fell from 86% in 2024 to 46% in 2025, while the share allocated to beneficiaries increased from 14% to 54%. The changes observed in 2025 are consistent with a shift in allocation behaviour following the trustee tax rate increase, with relatively more income now being allocated to beneficiaries and less being retained as trustee income.
Early indications from 2026 tax year dividend withholding tax data suggest that dividends paid by companies to their trust owners has increased since the 2025 tax year, but additional data will be required to determine whether allocations in the 2025 tax year represent a temporary adjustment in response to the trustee tax rate increase or are representative of future income allocation behaviour.