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Income Tax Act 2007

Taxation of certain entities - Trusts

HC 14: Distributions from trusts

You could also call this:

"What happens when a trust gives you money or property"

Illustration for Income Tax Act 2007

You get a distribution from a trust when the trustee gives you something because you are a beneficiary. A trustee makes a distribution when they transfer value to you. This can be money or property. When a trustee settles something for your benefit, it is treated as a distribution only if it would have been taxable to you if you got it directly. This can also happen when sections EW 50 or EZ 39 apply, which are about forgiving debt. If a trustee pays you interest on money they owe you, it is not a distribution unless the interest is more than the normal rate. A distribution happens when you get something that belongs to you absolutely, or when it is paid to you. You can get a distribution directly or indirectly, in one transaction or many. Just being a beneficiary of a trust does not mean you get or give value.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517287.

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Money and consumer rights > Taxes
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Part HTaxation of certain entities
Trusts

HC 14Distributions from trusts

  1. A trustee makes a distribution when the trustee transfers value to a person because the person is a beneficiary of the trust.

  2. Despite subsection (1), a settlement for the benefit of a beneficiary is treated as a transfer of value only—

  3. if the amount or the property being settled would have been beneficiary income of, or a taxable distribution to, a beneficiary, had it been distributed at the time to a beneficiary resident in New Zealand; or
    1. when sections EW 50 or EZ 39 (which relate to forgiveness of debt) applies, if the property being settled is an amount forgiven and treated as paid as described in section EW 44(1) or (2) (Consideration when debt forgiven for natural love and affection) or EZ 39(1).

      1. If a trustee pays to a beneficiary interest on an amount owed to the beneficiary, the payment is not a distribution by the trustee except to the extent to which the interest exceeds the amount given by the rate that is the greater of the market rate and the prescribed rate of interest.

      2. A distribution is made when what is transferred—

      3. vests absolutely in interest in the person; or
        1. is paid to the person.

          1. A distribution may be made directly or indirectly, or by 1 transaction or a number of transactions, whether related, connected, or otherwise.

          2. The fact that a person is, or will become, a beneficiary of a trust does not constitute the giving or receiving of value.

          Compare
          • 2004 No 35 s OB 1 distribution
          Notes
          • Section HC 14(2B) heading: inserted, on , by section 136(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
          • Section HC 14(2B) heading: amended, on , by section 71 of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
          • Section HC 14(2B): inserted, on , by section 136(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
          • Section HC 14 list of defined terms interest: inserted, on , by section 136(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
          • Section HC 14 list of defined terms prescribed rate of interest: inserted, on , by section 136(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).