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Income Tax Act 2007

Taxation of certain entities - Trusts

HC 6: Beneficiary income

You could also call this:

“Income given to trust beneficiaries within specific timeframes”

When a trustee of a trust earns income in a year, it’s called beneficiary income if it’s given to a beneficiary right away or paid to them within a certain time. This time is usually within 6 months after the end of the income year, or by the time the trustee has to file their tax return, whichever comes first.

Beneficiary income can also include special payments made to replace tax that wasn’t taken out of the income before it was given to the beneficiary.

Some types of income don’t count as beneficiary income. These include:

  • Income earned by a superannuation fund trust
  • Income from certain types of unit trusts
  • Some income from financial arrangements
  • Amounts related to tax credits for resident withholding tax

When a beneficiary gets this income, it’s treated as if they got it in the same tax year that the trustee earned it.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517263.

Topics:
Money and consumer rights > Taxes
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“Income earned by a trust that isn't given to beneficiaries”

Part H Taxation of certain entities
Trusts

HC 6Beneficiary income

  1. An amount of income derived in an income year by a trustee of a trust is beneficiary income to the extent to which—

  2. it vests absolutely in interest in a beneficiary of the trust in the income year; or
    1. it is paid to a beneficiary of the trust in the income year or by the date after the end of the income year referred to in subsection (1B).

      1. The date referred to in subsection (1)(b) is the later of the following:

      2. a date that falls within 6 months of the end of the income year; or
        1. the earlier of—
          1. the date on which the trustee files the return of income for the income year; or
            1. the date by which the trustee must file a return for the income year under section 37 of the Tax Administration Act 1994.

            2. Beneficiary income includes an RWT substitution payment made to a beneficiary under section RE 2(7) (Resident passive income) to the extent to which the payment meets the requirements of subsection (1) or is paid on a date referred to in subsection (1B).

            3. Beneficiary income does not include—

            4. an amount of income derived by a trustee of a trust in an income year in which the trust is a superannuation fund; or
              1. an amount of income derived by a trustee of a trust in an income year in which the trust is an approved unit trust referred to in clause 2 of the Income Tax Act (Exempt Unit Trusts) Order 1990; or
                1. an amount of income derived by a trustee that is income to which sections CC 3(2) (Financial arrangements) and EW 50 (Income when debt forgiven to trustee) apply; or
                  1. an amount by which a tax credit of a beneficiary for resident withholding tax is reduced under section LB 3(6) (Tax credits for resident withholding tax); or
                    1. an amount of a tax credit of a beneficiary allocated under section LB 3(5).

                      1. When an amount derived by a trustee in an income year is also beneficiary income, the beneficiary is treated as having derived the income in the same tax year as that corresponding to the trustee's income year.

                      2. Repealed
                      Compare
                      Notes
                      • Section HC 6(1)(b): substituted (with effect on 1 April 2009), on , by section 43(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section HC 6(1B) heading: inserted (with effect on 1 April 2009), on , by section 43(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section HC 6(1B): inserted (with effect on 1 April 2009), on , by section 43(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section HC 6(1C): inserted, on (with effect on 1 April 2008), by section 114(1) (and see section 114(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                      • Section HC 6(2)(ab): inserted, on , by section 85(1) (and see section 85(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                      • Section HC 6(2)(b): amended, on (with effect on 1 April 2008), by section 114(2) (and see section 114(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                      • Section HC 6(2)(c): inserted, on (with effect on 1 April 2008), by section 114(2) (and see section 114(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                      • Section HC 6(2)(d): inserted, on (with effect on 1 April 2008), by section 114(2) (and see section 114(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                      • Section HC 6(3) heading: substituted (with effect on 1 April 2009), on , by section 43(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section HC 6(3): substituted (with effect on 1 April 2009), on , by section 43(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section HC 6(4) heading: repealed (with effect on 1 April 2009), on , by section 43(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section HC 6(4): repealed (with effect on 1 April 2009), on , by section 43(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section HC 6 list of defined terms non-standard income year: repealed (with effect on 1 April 2009), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                      • Section HC 6 list of defined terms return of income: inserted (with effect on 1 April 2009), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).