TaxBlog

My Brother in Law David Simpkin has written an excellent article for anyone considering being a trustee.

Being a trustee is a serious job, and can have dire consequences if you are not aware of the duties placed on trustees.

For example most new trustees do not know that they are personally liable for any debts of the trust.

We have found that people are willing to take on the role of trustee for charities without any knowledge of what they should be doing.

This paper will especially assist them in their duty as trustee:

http://www.taxblog.co.nz/wp-content/TAKING-IT-ON-TRUST-v2.pdf

In other news the Law Commission has released a discussion document relating to trusts:

http://www.lawcom.govt.nz/sites/default/files/publications/2010/11/ip19_review_of_trust_law_in_new_zealand.pdf

Bookmark to:
          

Nation-wide advertising begins this week in a campaign to block Government plans for “an inheritance tax in disguise”.

Advertisements have been scheduled in major newspapers by the New Zealand Trustees Association seeking support from trustees, beneficiaries, and professional advisers for the association’s drive to oppose an increase in the family trust tax rate.

The Trustees Association represents registered and professional trustees, administrators, trust companies and professional advisors.

Association Executive Officer Errol Anderson said the Inland Revenue Department planned to raise family trust tax to 36% while lowering the company rate to 30%.

“This is an inheritance tax in disguise which will hit families hard,” he said.

“It is unacceptable for the rich, along with companies, to get a tax break at the expense of family trusts.

“More than 244,000 trusts are registered with the IRD. Most of them are family trusts where the minor beneficiaries ‹ children ‹ are already paying a corporate tax rate of 33%.

“Under this proposal, those children will pay more tax than companies and large corporate bodies.”

Bookmark to:
          

In a shock story today there is talk that the trust tax rate may rise to 36%.

The government is facing a second major rebellion over its tax policy amid growing certainty that it’s planning to raise trust tax to 36 per cent.

The potential tax grab, which would affect hundreds of thousands of New Zealanders, has prompted opponents to form a fighting fund aimed at forcing a government rethink.

The protest follows a storm of opposition to legislation introducing a capital gains tax on overseas investments.

The Trustees Association believes the government is plotting to raise the trust tax rate from 33 per cent as part of its proposals to drop the company tax rate. Not only would the trust tax hike help compensate for reductions in the company tax take, it would also hit back at people using trusts to shelter their assets from the taxman.

The plan would create a new range of rates, with company tax cut from 33 per cent to 30 per cent, top personal tax cut from 39 per cent to 36 per cent, and trusts increased from 33 per cent to 36 per cent.

Association chief executive Errol Anderson said the plan would mean that children, often the beneficiaries of trusts, would end up paying more tax than giant corporates.

“That’s a very cruel tax -targeting people who can’t defend themselves. (The government) will see trusts as an easy touch for raising tax, unless we unite,” Anderson said.

Though no final decision had been taken, Dunne admitted one option, backed by the IRD, was equalising the top personal trust and income tax rates at 36 per cent, and added that the government had crunched the tax numbers on tax paid by trusts.

Bookmark to:
          

Here’s one the general public probably doesn’t know about.

New Zealand is a tax haven.

What – you are thinking, after all this stuff about us being over taxed, how can NZ be a tax haven? The answer is in our world unique trust regime. You see NZ is the only country in the world where trusts are taxed based on the setlor’s residency. Other countries determine trust residency based on trustee residency. Therefore it is possible (and if structured well) likley that a trust may not be a tax resident anywhere (thus paying no tax).

This is the case in this article.

Diep le Shaker, the prominent Dublin restaurant whose building is at the centre of a High Court action between a woman and her son, is owned by a discretionary trust in New Zealand that has no tax obligations.

A New Zealand company called Sokel owns 80 per cent of the restaurant through a complex legal structure. Sokel is controlled by a Dublin-based businessman called Matthew Farrell, who leases the premises from the ffrench-O’Carrolls.

Court documents seen by The Sunday Business Post show that Sokel is a discretionary trust and is not obliged to pay tax on its dividends. Sokel owns a company called Killardport, which in turns owns Diep le Shaker and another Dublin restaurant, the Buddha Bar.

When asked why the company’s profits were routed through New Zealand, Farrell said last week that he had ‘‘absolutely no comment to make’’.

News to some. Unfortunately New Zealanders can’t take advantage of this regime because if the setlor of a trust is a NZ resident then the trust is taxed in NZ.

Bookmark to:
          

It seems the UK is following the lead of the US:

Gordon Brown has decided that from 2008, many trusts should be hit with a 6% charge every 10 years. The clampdown was aimed at ‘accumulation and maintenance’ trusts, often used for school-fee planning as well as other schemes used to pass wealth between generations.

Sounds much like a renamed wealth tax to me…

In fact the outcry over the tax continues, this article agrees with me that the tax is a hidden wealth tax.

Bookmark to: