Will you be impacted by the new 39% trustee tax rate?

As you will no doubt be aware, the trustee tax rate is proposed to increase to 39% for the 2024–25 and later income years (beginning 1 April 2024 for most trusts), from the current 33% rate. This will bring the trustee tax rate in line with the top marginal tax rate that kicks in on an individual’s income over $180,000.

The proposal was in a tax bill that was before Parliament until Parliament dissolved on 8th September 2023 for the general election. In order for the proposal to become law, Prime Minister-elect Christopher Luxon’s new Government will need to reintroduce the bill.

Luxon confirmed in the weeks leading up to the election that, while he does not support the trustee rate moving to 39%, the reality is that the Government can’t afford to leave the trustee rate at 33% given the Government’s current fiscal position. Therefore, the new Government will reintroduce the bill and the trustee rate moving to 39% on 1 April 2024 is pretty much a done deal.

Luxon did say that when the fiscal position improves, they will look to reduce both the trustee rate and the top marginal tax rate, however this would not be in the Government’s first term. The intention is for the trustee rate and the top marginal tax rate to be the same to discourage tax avoidance and protect the integrity of New Zealand’s tax system.

Given the certainty on the trustee rate increase, this is likely to have a significant impact on our clients with family trusts. Over the coming weeks, we will therefore be contacting our clients with trusts to discuss how they will be impacted.

In the meantime, if you would like to discuss your situation sooner, please reach out to your usual Nexia Advisor.