New IS on taxation of trusts released

It may not seem that long ago, 2018 in fact (although scarily whilst seeming just like yesterday, it was actually six years ago!), when Inland Revenue (IR) released a fairly comprehensive interpretation statement surrounding the taxation of trusts – IS 18/01.

Therefore, some of you may be a little surprised to hear that IS 24/01 has been released with the same title as its predecessor. The document is a general guide as to how income derived by the trustees of a trust is taxed, also explaining the various compliance obligations imposed on settlors, trustees, and beneficiaries under tax law.

The primary reason provided for the new release was the issue of IS 19/04, which was clearly published post-IS 18/01. It discussed distributions from foreign trusts, explaining the concept of a trust in more detail to help determine whether amounts of money or property received by New Zealand residents from overseas are taxable under the trust rules. The latest IS, therefore, includes portions of the IS 19/04 commentary where appropriate.

IS 24/01 is a 170-page document (no, I have not completed reading it yet), and I would suggest at this early stage in my reading, it could become your one-stop-shop and place to go whenever you have a trust taxation question.

Note that IR has stated that IS 24/01 does not deal with the proposed increase in the trustee tax rate to 39% effective April 1st, 2024 (which I suspect will go ahead now). Instead, this issue will be covered in a future TIB post the passing of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Bill (although, please note my below update on this topic).

This article from the 'A Week in Review' newsletter was originally published on Monday, 5th February 2024. If you have any questions or would like a second opinion on any national or international tax issues, please contact me [email protected] .?

If you would like to receive these updates directly to your mail inbox, you can subscribe by clicking here .