New trust tax rate: mitigating over-taxation

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Picture of Andrew Millington

Andrew Millington

Director and Chartered Accountant

As part of the Taxation (Annual Rates for 2023 – 24 Multinational Tax and Remedial Matters) Bill, the trust tax rate will increase from 33% to 39% from 1 April 2024.  

The new tax rate may be cause for concern for individuals with assets held through trusts, as even those not considered high-income earners may end up with their trust paying tax at a high rate of 39%. Inland Revenue has released a fact sheet which explains and gives examples of what would be acceptable when “mitigating over-taxation”. 

Lower-rate beneficiaries

One strategy involves allocating trust income to beneficiaries who are on lower personal tax rates. For instance, if beneficiaries have lower personal income compared to the trust’s income, allocating the income to them can result in taxation at their lower personal tax rates.  

Deceased estates

Additionally, special rules for deceased estates allow trustee income to be taxed at the deceased’s personal tax rates for 12 months after death. This can help alleviate tax burdens on estates during the settling period.  

Plan for these changes

We suggest consulting your accountant before making big trust-related decisions. There’s a difference between smart tax planning and illegal tax avoidance, and you don’t want to cross that line. We can help you explore strategies to minimise tax liabilities, while considering individual circumstances as approaches may vary. 

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