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Income Tax Act 2007

Taxation of certain entities - Trusts

HC 21: Distributions from community trusts

You could also call this:

“How you're taxed on money from community trusts”

When a community trust gives you money that isn’t regular income, this law applies to you. However, there are some exceptions. The law doesn’t apply if the money comes from income the trust earned in or before the 2003-2004 tax year, or if it’s part of the trust’s original funds or a gain in value of those funds.

The law also doesn’t apply if the money comes from certain types of payments made to the trust in the 2004-2005 or 2005-2006 tax years when a trust or company was shutting down. This exception is only for trusts that the community trust set up for charity, or companies that the community trust fully owned and ran for charity.

If the money doesn’t fall under these exceptions, then it counts as your income. This is true even if other parts of the law might say otherwise. You’ll need to report this money as income under section CV 14.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517308.

Topics:
Money and consumer rights > Taxes
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HC 20: Distributions from complying trusts, or

“Money from complying trusts is usually tax-free”

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HC 22: Use of tax losses to reduce taxable distributions from non-complying trusts, or

“Using tax losses to lower taxable income from certain trusts”

Part H Taxation of certain entities
Trusts

HC 21Distributions from community trusts

  1. This section applies when a community trust distributes an amount other than beneficiary income to a person.

  2. Subsection (1) does not apply to the extent to which the amount represents—

  3. income derived by the trustee in or before the 2003–04 income year:
    1. corpus of the trust:
      1. a capital gain of the trust:
        1. a distribution, settlement, or dividend made or paid to the trust in the 2004–05 or 2005–06 income year on the winding up of a trust or company, if—
          1. the community trust provided the corpus of the trust and the trust would have been run for charitable purposes but for the distribution, settlement, or dividend:
            1. the company is wholly-owned by the community trust and would have been established and run exclusively for charitable purposes but for the distribution, settlement, or dividend.

            2. Despite sections HC 15 and HC 20, the amount is income of the person under section CV 14 (Distributions from community trusts).

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            Notes
            • Section HC 21(3): amended (with effect on 1 April 2008), on , by section 263(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).