Important Update: Trustee Tax Rate Increase.

Important update: Trustee tax rate increase.

We regret to inform you that the new Government has reinstated the bill which will increase the trust tax rate from 33% to 39% on 1/4/2024. After much delay and speculation, this new tax threshold is now a certainty. Clearly the Government finances are in terrible shape, and we presume they had no choice but to push through the tax that was put forward in the final stages of the previous government’s reign.

We urge ‘you’ to have a ‘hard think’ about funding the 5% Dividend Withholding Tax required to get dividends out of your company for year ending 31/3/2024. As dividends paid out after 1/4/2024 will be effectively taxed at 39% for trusts.

Needless to say, this move is incongruent with National’s stated objective of lowering taxes. This is obviously frustrating as they have given trustees very little time to react, the date being only about six weeks away. The magnitude of uncertainty this has caused for business owners seems to be completely taken for granted by IRD/Government. It is particularly biting, given an already very unclear economic outlook. Just look at the commentary regarding uncertainty around interest rates, from ASB CEO Vittoria Shortt: “I think it’s dangerous to bank on rates staying the same, or definitely moving higher, or definitely moving lower.”