Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Taxation of certain entities - Trusts

HC 35: Beneficiary income of minors

You could also call this:

“How tax works for money given to children under 16 from trusts”

When you’re under 16 years old and living in New Zealand, you might get money from a trust. This is called beneficiary income. Here’s what happens to that money:

The money doesn’t count as your income. Instead, it’s treated as the trust’s income. This means the trust has to pay tax on it and report it to the government.

The trust will pay tax on this money at a set rate. This rate is found in a special list called Schedule 1, Part A, Clause 3.

However, there are some cases where these rules don’t apply:

If you get $1,000 or less from the trust in a year, these rules don’t count.

The rules also don’t apply if the money comes from certain types of trusts, like ones set up in special ways described in section HC 36, or from a will as described in section HC 37.

The rules also don’t apply if the money comes from a Maori authority, directly from a group investment fund, or if you get a child disability allowance under the Social Security Act 2018.

These rules are more important than some other rules about trusts and taxes. They override sections HC 5, HC 18 to HC 20, HC 22, HC 23, and HC 32.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517360.

Topics:

Money and consumer rights > Taxes

HC 34: Taxable distributions from non-complying trusts, or

“Tax on money from trusts that don't follow the rules”

HC 36: Trusts and minor beneficiary rule, or

“Rules for when trusts give money to children”

Part H Taxation of certain entities
Trusts

HC 35Beneficiary income of minors

This section applies when a person who is a minor derives an amount of beneficiary income from a trust in an income year. Subsection (4) and sections HC 36 and HC 37 override this subsection.
The amount is—
excluded income of the minor under section CX 58 (Amounts derived by minors from trusts); and
treated as trustee income for the purposes of who pays the relevant tax and who provides the return of income; and
subject to the basic rate of income tax set out in schedule 1, part A, clause 3.

For the purposes of this section, and sections HC 36, HC 37, LE 4, and LF 2 (which relate to the treatment of tax credits of beneficiary minors), a minor is a natural person resident in New Zealand who is under 16 years of age on the trust’s balance date for the income year.
This section does not apply—
if the total amount of beneficiary income that the minor derives from the trust in the income year is $1,000 or less; or
to beneficiary income derived—
1. from a trust settled in the way described in section HC 36:
2. from a testamentary trust described in section HC 37:
3. from a Maori authority:
4. directly from a group investment fund:
5. by a person for whom a child disability allowance is paid under the Social Security Act 2018.

This section overrides sections HC 5, HC 18 to HC 20, HC 22, HC 23, and HC 32.

Compare

2004 No 35 ss HH 3A–HH 3C, HH 3E, HH 3F(2), (2A)

Notes

Section HC 35(2)(a): amended, on 29 March 2024, by section 96(1) (and see section 96(3) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
Section HC 35(2)(b): replaced, on 29 March 2024, by section 96(2) (and see section 96(3) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
Section HC 35(2)(c): inserted, on 29 March 2024, by section 96(2) (and see section 96(3) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
Section HC 35(4)(a): amended (with effect on 1 April 2008), on 6 October 2009, by section 266(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section HC 35(4)(b)(v): amended, on 26 November 2018, by section 459 of the Social Security Act 2018 (2018 No 32).