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Income Tax Act 2007

Taxation of certain entities - Trusts

HC 24: Trustees’ obligations

You could also call this:

“Trustees must manage and pay tax on trust income”

As a trustee, you have to pay income tax on the money the trust earns as if it were your own personal income. This means you’re responsible for making sure the tax is paid.

When you’re working out how much tax to pay, you can’t use certain tax credits that are usually for individual people or for gifts.

If a young person (called a minor) gets money from the trust, it’s treated as if the trustee earned that money instead of the young person. This is covered in another part of the law called Section HC 35.

There’s also a rule about companies that are closely held (meaning they have few shareholders). If one of these companies gets money from the trust and meets certain conditions, that money is treated like it’s the trustee’s income. You can find more details about this in Section HC 38.

When you’re figuring out what expenses you can deduct from the trust’s income, you need to look at Section DV 9(2) of the law.

Lastly, there are some special rules about superannuation funds that can change how this all works. These rules are found in Sections CX 40, and DV 1 to DV 4 of 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=DLM1517320.

Topics:
Money and consumer rights > Taxes
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Part H Taxation of certain entities
Trusts

HC 24Trustees’ obligations

  1. A trustee must satisfy the income tax liability for their taxable income as if they were an individual beneficially entitled to the trustee income.

  2. In determining the income tax liability, the trustee is not entitled to have a tax credit under subparts LC and LD (which relate to tax credits for natural persons and for certain gifts).

  3. Section HC 35 applies to treat beneficiary income derived by a minor as if it were trustee income.

  4. Section HC 38 applies to treat beneficiary income derived by a close company that meets the requirements of the section as if it were trustee income.

  5. Section DV 9(2) (Trusts) applies for the purposes of calculating a trustee’s deductions.

  6. Sections CX 40, and DV 1 to DV 4 (which relate to superannuation funds) override this section.

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Notes
  • Section HC 24(2) heading: replaced (with effect on 1 April 2009), on (applying for the 2009–10 and later income years), by section 83(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
  • Section HC 24(2): replaced (with effect on 1 April 2009), on (applying for the 2009–10 and later income years), by section 83(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
  • Section HC 24(3B) heading: inserted, on , by section 92(1) (and see section 92(3) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
  • Section HC 24(3B): inserted, on , by section 92(1) (and see section 92(3) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
  • Section HC 24 list of defined terms cash basis person: repealed (with effect on 1 April 2009), on , by section 87 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
  • Section HC 24 list of defined terms close company: inserted, on , by section 92(2) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).