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Income Tax Act 2007

Avoidance and non-market transactions - Avoidance: specific

GB 5: Arrangements involving trust beneficiaries

You could also call this:

“Rules for changing trust beneficiaries who own company shares”

If you have a trust that owns shares or options in a company, this law applies when the trust changes who its beneficiaries are. The law says that if this change is made to try to get around rules about keeping ownership of the company, it will be treated differently.

When this happens, the law pretends that the trustee has sold the shares or options to someone not connected to the trust. Then it pretends the trustee bought them back right away. This only matters for specific rules about who controls the company through voting or how much of the company they own.

This law helps make sure people can’t use trusts to avoid rules about keeping the same owners of a company. It’s a way to keep things fair and stop people from finding loopholes in the law.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516884.

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Part G Avoidance and non-market transactions
Avoidance: specific

GB 5Arrangements involving trust beneficiaries

  1. This section applies when—

  2. a share in a company or option over a share in a company is held by a trustee; and
    1. a change occurs in the beneficiaries of the trust; and
      1. a purpose or effect of the change is to defeat the intent and application of a continuity provision.

        1. The trustee is treated as having disposed of the share or option to an unrelated person at the time of the change in beneficiaries, and as having reacquired it immediately afterwards.

        2. Subsection (2) applies only for the purposes of the application of the rules in sections YC 2 (Voting interests) and YC 3 (Market value interests) in the case of the continuity provisions.

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