Impending Trust Tax Rate Increase to 39%

Possible Tax Savings For You

From 1 April 2024 there are proposed changes to increase the trust tax rate from 33% to 39%, aligning it with the highest personal tax rate.

This adjustment aims to prevent trusts from being used to avoid the current top personal tax rate of 39%  Unlike personal tax, this higher rate applies to all earnings from the first dollar.

Key considerations if you have a trust: 

• Do you still need a trust?
• The trust tax rate will most likely increase to 39% from 1 April 2024.
• If you have a company with a trust shareholder that has retained earnings, it would be prudent to consider the declaration of a dividend before 31 March 2024.
• Cashflow could be a problem that can be managed or a partial dividend declared.
• The cost of not doing a dividend is $8,333 of additional tax for every $100,000 of retained earnings in a company owned by a trust after 31 March 2024 (assuming no beneficiary allocations are possible to lower marginal tax rate beneficiaries).

Contact us if you want specific advice for your situation and we will help work with you to maximise your position.

If you would like to more about these potential changes, PKF Kendons in Wellington have released a webinar which can be viewed here.