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HC 27: Who is a settlor?
or “Explanation of who counts as a settlor for a trust”
You could also call this:

“Situations where you might be considered a trust's settlor”

You can be treated as a settlor of a trust in several ways. If you do something, or don’t do something, that goes against what the trust rules are meant to do, you might be seen as a settlor. This includes making deals that work around the rules.

If you own a big part of a foreign company (at least 10%) that puts money into a trust, you could be seen as the settlor. This applies even if the company isn’t foreign but would have been treated as one when it put money in the trust.

You’re also considered a settlor if you’re already a settlor of one trust, and that trust puts money into another trust or gives money to it.

If you get rights or powers over a trustee or settlor of a trust, and this lets you ask the trustee to treat you or someone you choose as a beneficiary, you’re seen as a settlor too.

All these rules are part of the Income Tax Act 2007 and help decide how trusts are taxed in New Zealand.

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Next up: HC 29: Settlors’ liability to income tax

or “How you might pay income tax on trust income if you set up a trust”
Next

Part H Taxation of certain entities
Trusts

HC 28Activities treated as those of settlor

  1. This section applies for the purposes of the trust rules to describe certain activities of a person that result in the person being treated as a settlor.

  2. A person is treated as a settlor if, in relation to a trust,—

  3. they act, refrain from acting, or enter into a transaction or a series of transactions; and
    1. what is done or not done has the effect of defeating the intent and application of the trust rules.

      1. A person is treated as a settlor of a trust if a controlled foreign company settles an amount on a trust and the person has a control interest of 10% or more in the CFC—

      2. at the time of the settlement:
        1. for the accounting period of the CFC in which the settlement occurs.

          1. A person is treated as a settlor of a trust if—

          2. a company settles an amount on the trust; and
            1. the company would have been a CFC at the date of settlement if it had been a foreign company at the time; and
              1. the person would be treated as having a control interest of 10% or more in the company, if the company were a foreign company,—
                1. at the time of the settlement:
                  1. under section EX 1(3), for the accounting period of the company in which the settlement occurs.

                  2. A person is treated as a settlor of a trust (the sub-trust) if—

                  3. they are a settlor of a trust (the head-trust); and
                    1. a trustee of the head-trust settles an amount on the subtrust, or makes a distribution to, or on terms of the subtrust.

                      1. A person is treated as a settlor of a trust if—

                      2. they acquire, directly or indirectly, rights or powers in relation to a trustee or a settlor of the trust; and
                        1. the acquisition has the purpose or effect of enabling them to require the trustee to treat them, or a nominee, as a beneficiary of the trust.

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                          Notes
                          • Section HC 28(3): replaced, on , by section 142(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                          • Section HC 28(4)(c): replaced, on , by section 142(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                          • Section HC 28 list of defined terms accounting period: inserted, on , by section 142(3) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                          • Section HC 28 list of defined terms controlled foreign company: inserted, on , by section 142(3) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).