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HB 13: LTC elections
or “How to choose for your company to become a look-through company for tax purposes”
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“This subpart explains how taxes work for trusts and outlines key rules and definitions”

This part of the law, along with the trust rules, explains how taxes work for trusts. It tells you about the tax on money given out by trusts. It defines two important terms: beneficiary income and taxable distribution.

The law also talks about how trustee income is taxed. It puts trusts into three groups to decide how to treat money given out that isn’t beneficiary income. These groups are complying trusts, foreign trusts, and non-complying trusts.

The law explains who a settlor is and what taxes they need to pay. It also tells you what happens with trusts set up by people who move to New Zealand.

Some things aren’t covered by the trust rules. These include unit trusts, some group investment funds, Maori authorities, and certain distributions from trusts before 1989.

If you set up a trust with a trustee who doesn’t live in New Zealand, you need to tell the government about it.

There’s a rule that can make it look like you got something from a trust even if someone else actually got it.

If a superannuation scheme that was treated like a company because it was a unit trust becomes a superannuation fund, it’s treated as if it closed down and is no longer a company.

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Next up: HC 2: Obligations of joint trustees for calculating income and providing returns

or “Joint trustees must calculate trust income and report it together”
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Part H Taxation of certain entities
Trusts

HC 1What this subpart does

  1. This subpart, together with the trust rules,—

  2. provides for the taxation of distributions from trusts, for this purpose defining—
    1. beneficiary income:
      1. a taxable distribution:
      2. provides for the taxation of trustee income:
        1. classifies trusts into the following 3 categories for the purposes of determining the treatment of distributions that are not beneficiary income:
          1. complying trusts:
            1. foreign trusts:
              1. non-complying trusts:
              2. determines who is a settlor, and sets out their income tax liability:
                1. sets out the treatment of trusts settled by persons becoming resident in New Zealand.

                  1. The trust rules do not apply to—

                  2. a unit trust:
                    1. a group investment fund to the extent to which it is treated as a company under this Act:
                      1. a Maori authority:
                        1. a distribution under section HZ 1 (Distributions from trusts of pre-1989 tax reserves).

                          1. Section 59 of the Tax Administration Act 1994 requires the disclosure of a settlement on a trust with a non-resident trustee.

                          2. Section GB 22 (Arrangements involving trust beneficiary income) may apply to treat a beneficiary as receiving property, or enjoying services or benefits, in fact received, or enjoyed, by another person.

                          3. A superannuation scheme that is treated as a company because it is a unit trust and then becomes a superannuation fund is treated as—

                          4. liquidated under section CD 12 (Superannuation schemes entering trust rules) immediately before the date on which it becomes a superannuation fund; and
                            1. no longer a company.

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