Trustee tax rate changes

Trustee tax rates are changing, here are some key considerations from Graham Lawrence at The Advisory Group.


  • The trustee tax rate is set to increase from 33% to 39%, with a proposed effective date of 1 April 2024. At this stage the newly formed Government have not indicated any change to this. 
  • The impact of this change will vary depending on the type of trust and the distribution of income to beneficiaries.
  • Trustees should evaluate the purpose of the trust and its benefits for beneficiaries, including succession and estate planning, controlled financial support, and asset protection.

Possible short-term strategies

  • For investments in privately held companies, discuss a full distribution of retained earnings to the trust to ensure income has a maximum tax rate of 33% (and possibly taking advantage of lower tax rates for beneficiaries in the lower tax bracket).
  • Considering whether investments are held in the most appropriate way. For example, if an investment portfolio was held by a wholly owned company of the trust the applicable tax rate on the investment income would be 28%.

Possible long-term strategies

  • Evaluate trust restructuring options to distribute income among beneficiaries in different tax brackets.
  • Explore alternative investments subject to lower tax rates or offering tax advantages 
  • Utilise imputation credits from companies paying 28% corporate tax to offset beneficiary taxation.
  • Examine whether distributions are being made for charitable purposes. Using a charitable trust alongside the income-earning trust to distribute income subject to tax exemptions, reducing the overall tax burden.

In conclusion, while the increase in the trustee tax rate presents challenges, trusts remain valuable asset planning structures. By employing a combination of short-term and long-term strategies, trustees can optimise tax outcomes, protect assets, and fulfil the intended purposes of the trust. It is essential to evaluate the specific circumstances of your trust and seek advice from your accountant and/or lawyer before the legislation takes effect.

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