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HC 37: Testamentary trusts and minor beneficiary rule
or “Rules for trusts set up in wills that pay money to young people”
You could also call this:

“Tax rules for close companies receiving money from trusts”

This section applies to a close company that gets money from a trust. It happens when certain people own a part of the company. These people can be the trust’s settlor, the trustees, someone the settlor cares about, or trustees of another trust where the settlor cares about its settlor or beneficiary.

This rule doesn’t apply if the close company is a Maori authority, a tax charity, or a securitisation trust beneficiary.

If this rule applies, the money the company gets from the trust is treated in a special way. The company doesn’t have to pay tax on it. Instead, it’s treated as if the trustees got the money. The trustees have to pay tax on it and report it in their tax return. The tax rate for this money is set out in schedule 1, part A, clause 3.

This rule is more important than some other rules about trusts (sections HC 5, HC 22, HC 23, and HC 32). But if the money is a dividend within a New Zealand wholly-owned group, that rule (section CW 10) is more important than this one.

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Next up: HC 39: Trustee income: disabled beneficiary trusts

or “Tax rules for trusts that only support people with disabilities”
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Part H Taxation of certain entities
Trusts

HC 38Beneficiary income of certain close companies

  1. This section applies when a close company derives an amount of beneficiary income from a trust (trust A) in an income year and a voting interest or market value interest in the close company is held, directly or indirectly, by 1 or more of the following:

  2. a settlor of trust A:
    1. the trustees of trust A:
      1. a person for whom a settlor of trust A has natural love and affection:
        1. the trustees of a trust (trust B), if a settlor of trust A has natural love and affection for a settlor or beneficiary of trust B.

          1. This section does not apply to a close company that is a—

          2. Maori authority:
            1. tax charity:
              1. securitisation trust beneficiary.

                1. The amount is—

                2. excluded income of the close company under section CX 58B (Amounts derived by certain close companies from trusts); and
                  1. treated as trustee income for the purposes of who pays the relevant tax and who provides the return of income; and
                    1. subject to the basic rate of income tax set out in schedule 1, part A, clause 3.

                      1. This section—

                      2. overrides sections HC 5, HC 22, HC 23, and HC 32; and
                        1. is overridden by section CW 10 (Dividend within New Zealand wholly-owned group).

                          Notes
                          • Section HC 38: inserted, on , by section 97(1) (and see section 97(2) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).