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If you’re getting money from a trust that’s based in New Zealand, that trust will usually deduct any tax before they pay you.

Paying tax on beneficiary income

In most cases, any tax you pay on your beneficiary income will be at your personal income tax rate. There are special rules that apply for beneficiaries under the age of 16 and corporate beneficiaries. 

If you receive a distribution from a trust, it cannot include any losses.

If you receive some, but not all, of a trust’s income from a source that earned tax credits then you should receive the same share of the tax credits that you do of the original income source.

Beneficiaries under the age of 16

Beneficiaries under the age of 16 are known as minor beneficiaries.

If your trust has been settled by a relative or someone with legal guardianship of a minor beneficiary, then any income the trust distributes is taxed differently. If your trust distributes income to a minor beneficiary, that income is usually taxed as trustee income, not as beneficiary income. There are a few exceptions to this, such as:

  • The trust distributes $1,000 or less to the minor beneficiary in a tax year
  • The minor beneficiary is receiving a child disability allowance
  • The trust exists to handle a deceased person’s estate
  • The income comes from a Māori authority.

Corporate Beneficiaries

In most situations, if a company is the beneficiary of a trust, any income is taxed at the company’s tax rate. However, if your company is a close company, income may be taxed at the trustee income tax rate.

Your close company’s beneficiary income may be taxed at the trustee income tax rate if the settlor of the trust is any of the following:

  • A shareholder in the close company
  • A relative of a shareholder of the company
  • Married to a shareholder of the company
  • In a long-term relationship to a shareholder of the company
  • A close friend of a shareholder of the company.

The trustee income tax rate does not apply if the trust was settled for handling debt securities, known as securitisation trusts.

Special Report

You can find more information on our tax policy site.

Special Report: 39% Trustee Tax Rate - Tax Policy

Last updated: 11 Apr 2024
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