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Budget 2023: Trustee tax rate to increase to 39%

Auckland, 18 May 2023 – Despite maintaining that Budget 2023 would have ‘no major tax changes,’ the Government today announced an increase in the trustee tax rate from 33% to 39% with effect from 1 April 2024.

For the 400,000 trusts registered in New Zealand, this will undoubtedly be perceived as a significant increase, especially off the back of the introduction of considerable disclosure requirements.

Support for the change came from new information from Inland Revenue that showed “an almost 50 percent spike in income subject to the trustee rate, from $11.4 billion in the 2020 tax year to $17.1 billion in the 2021 tax year.”

“Given this statistic pre-dates the trust disclosure data which has just been collected, it’s not clear what the real purpose of the disclosure rules was, as the decision to increase the trustee rate hasn’t been based on that data,” comments Deloitte Tax Partner, Robyn Walker.

“With the significant costs incurred in complying with the trust disclosure rules, we hope these compliance cost heavy rules are repealed as a consequence of the rate change.”

The increase in income in 2021 doesn’t come as a surprise, as more of a natural and expected reaction to the increase in the personal tax rate, and something Inland Revenue has indicated they didn’t have a concern with.

The official Budget Press Release suggests that this change won’t materially impact most trusts, however the fact that most trusts will not be paying the majority of the tax will be of little comfort to the significant number of trusts held by ‘regular New Zealanders’ with a marginal tax rate of 33% or lower.

Some minor exemptions from the rule are proposed for deceased estates and trusts for disabled persons.

The change to the trustee tax rate is included in legislation tabled on Budget Day and will be subject to consultation through the Select Committee process.

For Deloitte’s full Budget 2023 commentary visit: Striking a balance | New Zealand Government Budget 2023

For spokesperson comments please contact Deloitte Tax Partner Robyn Walker:
M: +64 211315413