Why set up a New Zealand Trust?
A properly set up New Zealand Trust is safer than a Swiss bank. It can be used to protect your assets from any personal claims, whether they come from creditors, governments, disgruntled ex-partners and even family members.
They not only protect the wealth that has been generated from your efforts but they also allow you to ensure the assets are distributed without having to concern yourself about dissatisfied family members trying to redistribute your wealth by taking action through the courts.
A New Zealand trust is relatively inexpensive to set up and maintain. However, if there are parties in Australia or overseas it is important that these factors are taken into consideration during the trust’s operation, funding and distribution of income and capital.
We are experienced in dealing with New Zealand trusts and will help you ensure that your New Zealand trust will deliver on your desired objectives (providing those objectives are legal in New Zealand).
So, if you are considering setting up a New Zealand structure such as a New Zealand company, Trust or partnership, please contact us first. There is no charge for a quick chat so we can talk you through the issues.
Let us help make setting up your Trust in New Zealand stress-free.
What is a New Zealand Trust?
New Zealand trusts are the envy of the world. When established and administered correctly they are as good as Fort Knox when it comes to protecting your assets. New Zealand courts will not set aside a properly established and administered New Zealand trust. That can mean your assets are protected from creditors.
Furthermore, trusts are a good vehicle for transferring assets to family members during succession. They make it very difficult for disgruntled family members to undermine your wishes through court action like they can when wills are used as a means of succession planning.
And when you consider New Zealand’s stable political and economic environment and the fact that New Zealand does not have any capital gains taxes of note, nor do they have inheritance taxes, stamp duty, gift duty or other indirect taxes, there is a lot to be said about using a New Zealand trust.
New Zealand trusts are “secret”. There is no public record or register open to members of the public which show the details of a trust’s activities or even who is involved in them.
And even with recent changes in the legislation, there is still only limited disclosure required.
There is no wonder that so many New Zealanders have trusts, no matter what their level of wealth. They are relatively inexpensive to set up and administer and are well protected by New Zealand legislation. In fact, trusts are regarded as sacred cows in New Zealand.
The important thing to bear in mind is that overseas authorities (like the ATO) have a very different way of interpreting things that New Zealanders regard as commonplace when running their New Zealand trust. It is therefore important to ensure the trust deed is prepared in such a way that the intent is clear and authorities outside New Zealand can’t dismantle the trust. It is also critical that the trust is governed properly so as not to open the door to those who are trying to access the trust’s assets.
In more recent times there has been a lot of publicity given to the treatment of foreign trusts in New Zealand.
These trusts are only required to pay income tax on income that is sourced in New Zealand. Therefore, any income earned by the trust from offshore (outside New Zealand) is exempt from tax.
****There are now some registration requirements but, again, providing the trust is set up correctly and the disclosure requirements are met, the tax savings can be significant. However Australian-based residents should note that Inland Revenue routinely advises the ATO of any Australian involvement. Therefore, when Australian tax resident are looking to utilise the advantages of New Zealand foreign trusts it’s important to get good advice.
We can assist with the establishment of any type of New Zealand trust and we qualify as a “Qualifying Resident Foreign Trustee” for the establishment of foreign trusts. New Zealand’s foreign trust regulations provide amazing opportunities for genuine businesses. However we comply with New Zealand law both in word and in spirit and we will not administer or be involved with any trustees who do not comply with New Zealand’s Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
We can also help administer the trusts and do what needs doing in order to maintain the vault-like protection that New Zealand trusts can deliver.
When it comes to trust distributions, each beneficiary will need to file an individual income tax return in New Zealand. Under current legislation that requires each beneficiary to have an IRD number (a New Zealand tax file number) and to have an IRD number, each beneficiary must have a New Zealand bank account. With current New Zealand banking policies, that may be problematic.
If the Trust intends to claim New Zealand GST the way it operates in New Zealand will be important. We can assist to ensure you have the right tax structure in place for doing business in New Zealand.
Taxation on a New Zealand Trust
Although the trust identifies who the discretionary beneficiaries are who may benefit from the income or capital of the trust, it is for the trustees and not those beneficiaries to determine to what extent, if at all, they will receive any benefit from the trust. Just because a person might be nominated as a beneficiary of the trust does not give them entitlement to demand anything from the trust. It is simply for the trustees to act in a way that is consistent with the trust deed.
Discretionary trusts will be subject to income tax in New Zealand on the worldwide income. Any income retained by the trustees on behalf of the trust will be subject to a top tax rate of 33%. Any income distributed to the beneficiaries will be subject to a lower tax rate. Depending on the amount, that could be as low as 10.5%.
You should note that all beneficiaries will be required to file a New Zealand income tax return when they receive income from the trust.
Foreign trusts are established and registered under a specific legislative process.
In short, a properly established and administered Foreign Trust is not subject to tax on any income earned from outside New Zealand. It will be subject to income tax on any New Zealand-sourced income though.
New Zealand’s foreign trusts require registration and ongoing disclosures to Inland Revenue.
Failure to comply with the requirements will result in the foreign trust losing its tax-exempt status with regard to overseas income.
We are a “qualifying resident trustee” meaning we can not only establish your trust, but administer it and help you comply with the requirements necessary to secure the tax-exempt status on income sourced from outside New Zealand.
New Zealand Trusts only require one trustee. We can recommend the best course of action when it comes to determining the most applicable trustee or trustee structure for both New Zealand Discretionary Trusts and New Zealand Foreign Trusts.
We qualify as a resident qualifying trustee with regard to New Zealand’s requirements for a New Zealand foreign trust that is to have a tax-exempt status for income sourced outside New Zealand.
When there is a preference for a corporate trustee we can assist with the incorporation of a New Zealand company and complete all necessary company and tax registrations.
New Zealand Trust Packages
New Zealand Discretionary Trust – $1100 (including GST)
A Discretionary Trust is more commonly referred to as a Family Trust.
This fee to establish a New Zealand discretionary trust includes drafting the trust deed, all initial resolutions and completing the appropriate registration of the documents with Inland Revenue along with registration for all relevant tax types.
We can act as the only trustee or advise your own trustees in order to ensure the trust continues to comply and therefore benefit from the advantages of a New Zealand trust.
Our annual trustee fee starts at $470 +GST.
New Zealand Foreign Trust – $3950 (including GST)
This fee to establish a New Zealand Foreign Trust includes the required trust deed, preparation of all required resolutions and the full registration process with Inland Revenue (including paying the relevant fees).
Sections HH 4(3BB) and HH 4(3BC) of the Income Tax Act 2004, sections 3(1), 22(2)(fb) and (m), 22(2C), 22(7)(d), 59B, 61(1B), 81(4)(mb), 143(1B), 143(IC), 147(2B) and 147B of the Tax Administration Act 1994 all have particular requirements that need to be complied with in order to retain a New Zealand foreign trust’s tax-exempt status on income sourced outside New Zealand. There are also other obligations that need to be met.
Our annual fee to prepare and maintain the required records and ensure disclosures are filed within the prescribed time frame, and inclusive of all fees paid to Inland Revenue, starts from $1450 +GST.
Questions About Setting Up A New Zealand Trust?
Our New Zealand expert, Mike Reddy, is a New Zealand accountant and NZ-registered tax agent based in Sydney.
Having worked with many Australian tax residents and assisting them to create the New Zealand structure best suited for their circumstances, he can advise you on the best course of action. With regard to New Zealand trusts, he can prepare trust deeds, required resolutions, complete all New Zealand tax registrations and compliance documents and disclosures.
Naturally, we can also prepare tax returns for New Zealand trusts.