Private Wealth 2021

Last Updated August 12, 2021

New Zealand

Law and Practice


Cone Marshall Limited is a law firm providing global and independent legal, advisory and fiduciary services, comprised of lawyers, trust officers, wealth planners and accountants. It specialises in trusts, wealth and asset management, succession planning, tax planning and fiduciary services. The firm advises on how to securely and efficiently structure wealth and plan for its succession to future generations, and it aims to meet clients' needs, whether domestic or international, individual, family or business. The team has special skills in resolving conflicts of law across multiple legal systems. Formed in New Zealand in 1998, Cone Marshall has expanded into a global group, which now administers trusts and related entities across multiple jurisdictions, with offices in the USA (New York, Wyoming and Florida), Hong Kong, Montevideo, São Paulo, Geneva, Lugano, London, Milan, Athens and Tortola, British Virgin Islands.

New Zealand’s tax system does not include the following:

  • inheritance tax/estate tax;
  • wealth tax;
  • gift duty;
  • stamp duty;
  • social security tax;
  • capital gains tax (with some limited exceptions); and
  • local or state taxes (apart from property rates levied by some local councils and authorities).

Individual Tax

An individual New Zealand tax resident (NZTR) is subject to New Zealand income tax on worldwide income and New Zealand-sourced income. 

All personal income tax rates were reduced as of 1 October 2010:  

  • up to NZD14,000 per year – 10.5%;
  • from NZD14,001 to NZD48,000 – 17.5%;
  • from NZD48,001 to NZD70,000 – 30%; 
  • NZD70,001 to NZD180,000 – 33%; and
  • NZD180,001 and over – 39%. 

An individual’s income includes the following sources:

  • business;
  • partnership;
  • employment;
  • interest;
  • dividends;
  • government pension; 
  • annuities;
  • beneficiary income under a trust; and
  • royalties.

Non-residents (individuals and entities) are taxed on New Zealand-sourced income including interest, dividends and royalties.

Trust Tax Regime

A complying trust is a domestic trust that has been established by a New Zealand resident settlor. It is taxed at a rate of 33% on worldwide and New Zealand-sourced income.

A foreign trust is established by a non-resident settlor and has a New Zealand resident trustee. A foreign trust is exempt from New Zealand income tax on worldwide income and is only taxed on New Zealand-sourced income at a rate of 33%. 

Foreign trusts are unique in that they can be used as offshore vehicles by non-residents as part of their estate and wealth planning. Provided none of the assets of the trust are New Zealand-situs assets, then in most cases the income derived from the holding of those assets can be distributed to non-resident beneficiaries, without any liability to tax arising in New Zealand.

A non-complying trust occurs when the non-resident settlor of a foreign trust becomes a New Zealand tax resident. Distributions of capital gains and income from a non-complying trust are taxed as beneficiary income or taxable distributions at a rate of 45%.

A person becomes tax resident from the date:

  • they cease being a transitional resident; or
  • their first day of residence in New Zealand.

The settlor should make an election (for the non-complying trust to become a complying trust) within 12 months of becoming tax resident to prevent punitive tax rates from applying to distributions.

Company and Limited Partnership Regime

The worldwide and New Zealand-sourced income of a company is taxed at 28%. 

A limited partnership is transparent for tax purposes. In determining its income tax liability, the general partner may attribute the partnership’s income, expenses, tax credits, rebates, gains and losses to the underlying partners in proportion to their partnership interests.

The partnership can be a useful offshore vehicle for a non-resident. 

Transitional Residence Rule

The transitional resident exemption enables persons who become resident in New Zealand to receive most of their worldwide income tax-free for 48 months from the date they become tax resident. 

This exemption is also available to New Zealand residents who have been absent from New Zealand for ten years or more.

Traditionally, tax policy in New Zealand has been stable and consistent over recent decades and this is expected to continue. 

A Tax Working Group was established by the New Zealand government in late 2017 to review the current taxation system. The mandate of the Working Group was to provide an opportunity for the government and country to review the fairness of the tax system and debate options for change.

The government has responded to the recommendations proposed by the Working Group. It has stated that it will not be introducing a capital gains tax, wealth tax or land tax. Furthermore, the government has no policy or intention to change the rates of tax to which businesses are subject. Instead, it is considering reducing the tax-compliance costs businesses face by looking at the options and adjustments proposed by the Working Group. The government has also stated that work is already underway on various taxation instruments that tax businesses that have a negative environmental impact, in order to reduce greenhouse gases, address water pollution and abstraction issues, as well as solid waste disposal. At the same time, the government acknowledges that more work needs to be done on environment tax policy. 

The incumbent party won enough seats in the 2020 election to govern alone and has reiterated that there is no foreseeable need to make major changes to the tax system. The absence of a wealth tax and most capital taxes makes New Zealand an attractive and stable place to live and invest.

On 30 July 2019, New Zealand enacted the Trusts Act 2019 (TA 2019). It came into force on 30 January 2021 and replaced the Trustees Act 1956 with a modern, coherent and useful statute which takes the most fundamental trust law principles from the common law and puts them into accessible legislation for all to understand. The TA 2019 does not codify all trust law but recognises the complexity, nuances and desire for continued development through case law. 

Measures Introduced in Response to COVID-19

On 30 April 2020, the COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act was unanimously passed by the New Zealand Parliament. This Act introduces several temporary measures that are intended to provide financial support to businesses and individuals through the tax system and the Commissioner of Inland Revenue and is expected to provide more than NZD3 billion in tax relief.

The Act introduces a temporary loss carry-back scheme. Under this scheme, a tax payer expecting to make a loss in either the 2019–2020 or 2020–2021 tax year can estimate that loss and offset it against a profit made in a previous tax year, which may result in a refund of taxes paid in the immediately preceding tax year. The terms of the loss carry-back scheme are applicable to companies, trusts, and certain individuals. 

The Inland Revenue Department (IRD) has also been granted greater flexibility to temporarily change statutory tax dates, filing deadlines, timeframes and procedural requirements for businesses and individuals impacted by COVID-19. While the IRD have not issued a blanket extension of filing deadlines, it has been confirmed that a pragmatic approach will be applied and that filing deadlines may be extended on a case-by-case basis. The IRD have confirmed that extensions will not be granted for Goods and Services Tax (GST) and pay as you earn (PAYE) returns, but the IRD have indicated that any penalties for late filing or late payment may be remitted where the delay is due to the effects of COVID-19. 

New Zealand implemented the Foreign Account Tax Compliance Act (FATCA) and the provisions of a Model 1 Intergovernmental Agreement in July 2014.   

In 2017, its tax laws were amended to implement the Common Reporting Standard (CRS) as well as to update New Zealand foreign trust disclosure rules (NZFTDR). Under the NZFTDR, where a non-resident has settled a foreign trust with a New Zealand resident trustee, that foreign trust will need to be registered with the IRD. 

The information that must be disclosed to the IRD is almost exactly the same as that under the CRS, however, it is important to note that the two regimes are entirely separate and there is no automatic exchange of information under the foreign trust rules.

The NZFTDR has the following features:

  • compliance is necessary to maintain the foreign trust's income tax exemption, which includes filing the annual return and financial statements;   
  • the trustee needs to file the trust deed, and provide contact details for the settlor, protector, any non-resident trustees, and any other natural persons who have the ability to control the trust;
  • the information disclosed to the tax department is confidential and the register may not be accessed by members of the public; and
  • the information will only be shared by the IRD on receipt of a valid request on notice to the trustee from a New Zealand treaty partner under exchange of information arrangements (double tax agreements, tax information exchange agreements and/or the Multilateral Convention on Mutual Administrative Assistance in Tax Matters).

Wealth Planning Advantages Enjoyed by New Zealand

New Zealand’s Anti-money Laundering and Countering Financing of Terrorism Act 2009, FATCA, the CRS and the foreign trust rules register enhance New Zealand’s reputation as a safe, politically and economically stable country within which legitimately sourced wealth can be protected for future generations. These laws help to uphold New Zealand’s international reputation as a tax-compliant and co-operative jurisdiction. In addition, within New Zealand, the registration of foreign trusts has been effective in restoring public confidence in the industry. 

As a founding member of both bodies, New Zealand is fully compliant with Financial Action Task Force (FATF) and OECD standards and is known as a transparent and safe jurisdiction. 

Furthermore, New Zealand as a jurisdiction provides the following features which are beneficial for international trust and wealth planning purposes: 

  • it is a member of the OECD group of countries;
  • it is party to numerous important double taxation treaties and taxation information exchange agreements;
  • it has comprehensive anti-money laundering legislation;
  • trusts may operate for a maximum of 125 years; and
  • a New Zealand trust may hold any assets, including property, as well as trade or operate a business.

Individuals tend to pass assets to the next generation freely through wills and trusts. There are no forced heirship laws, and individuals have testamentary freedom. 

New Zealand succession laws apply to a non-resident who has property located in New Zealand as well as to an individual who is living in New Zealand and has property located in New Zealand. 

Trusts are commonly used for family succession, asset protection, to hold businesses and real property, collections, and for charitable purposes. It is estimated there are currently between 300,000 and 500,000 registered domestic trusts in New Zealand, and 10,000 foreign or international trusts; the actual total is probably close to 400,000. This compares to 149,000 trusts in the United Kingdom ( 2017/2018).

There is no gift/transfer tax nor estate/inheritance tax in New Zealand. The taxation of domestic trusts is relatively simple and foreign trusts are exempt from income tax on non-New Zealand-sourced income. 

When distributing wealth to family members, taxation of distributions will depend on the tax status of the trust and the tax residence of the beneficiary. Provided none of the assets of the foreign trust are New Zealand-situs assets, then in most cases the income derived from the holding of those assets can be distributed to non-resident beneficiaries, without any liability to tax arising in New Zealand.

However, residents, non-residents and migrants to New Zealand need to be aware of disclosure and reporting requirements that may apply to the proposed wealth transfer under FATCA, the CRS and/or foreign trust rules.

New Zealand does not have forced heirship laws. There is no corresponding legal category under which a foreign court order could be enforced in New Zealand. It would be difficult to sustain an action for the enforcement of a foreign judgment, as the New Zealand-resident respondent would usually hold the assets at issue pursuant to a trust.

Although individuals have testamentary freedom, there are some important exceptions to this principle. In addition to pursuing the standard common law challenges to the validity of a will (lack of testamentary capacity, duress, etc), there are two statutory mechanisms that allow courts to intervene and alter the division of an estate as stated in the will. The Law Reform (Testamentary Promises) Act 1949 provides for the recognition of promises made by a testator during their lifetime to make provision for a person in their will, and the satisfaction of that promise from the estate where no provision has been made for the person challenging the will. The Family Protection Act 1955 allows the court to make orders mandating departure from the dispositive provisions in the will where inadequate provision has been made for persons to whom the testator owed a moral obligation of financial support.

As succession law in New Zealand is currently governed by a wide number of statutes, many dating from the early to mid-20th century, the Law Commission is currently undertaking a review of New Zealand’s succession law. The issues covered by this review will include (but not be limited to) consideration of:

  • who should be entitled to claim property despite the provisions of the deceased’s will, with a particular focus on a surviving spouse or partner and other members of the deceased’s family;
  • who should be entitled to share in property when a person dies intestate, with a particular focus on a surviving spouse or partner and other members of the deceased’s family;
  • what the policy justifications should be for such entitlements;
  • what property should be available to meet entitlements; and
  • ancillary and procedural matters.

In New Zealand, the Property (Relationships) Act 1976 (PR Act) deals with how the relationship property of married couples, civil union partners and de facto couples is divided when a relationship ends (through separation or death). Usually, it is distributed equally.

Whether the rules in the PR Act apply depends on the characteristics and duration of the relationship.

One spouse or partner cannot transfer relationship property without the consent of the other spouse or partner. They may contract out of the provisions of the Act by entering into a contracting out agreement (sometimes known as a prenuptial agreement). The formalities prescribed under the PR Act must be followed, including the requirements for the agreement to be in writing and that both parties must obtain independent legal advice. The purpose of the formalities is to help ensure that each party understands the effect of the agreement, which may be contrary to their own interests, and to limit the impact of undue influence from the other party to sign the agreement.

Nevertheless, even where the formalities are satisfied, the court may still override the agreement if it considers that enforcement will result in serious injustice to one party. 

However, some judges may be more inclined to enforce the agreement if each party understood the difference in their entitlements at the time of signing the agreement and had merely changed their mind later. 

Furthermore, separate property may become relationship property if it is intermingled with relationship property or used for joint purposes or to purchase joint assets. Additionally, if debts were jointly incurred by both parties, or were incurred for the purpose or benefit of the couple or any child of the relationship, spouses are jointly liable for such debts. A spouse cannot, however, be held liable for debts incurred by either of the respective spouses prior to the marriage.

The PR Act applies to couples residing within New Zealand, regardless of their citizenship.

Usually, the transfer of property does not affect the cost basis of property being transferred. However, the transfer or sale of property may be taxable and/or require regulatory consent. 

The Bright-Line Property Rule

The sale of a residential property may incur a charge to income tax where the property is sold within a certain period, known as the “bright-line" period.

The bright-line property rule looks at whether the property was acquired and applies to properties acquired:

  • on or after 27 March 2021, and sold within the ten-year bright-line period;
  • between 29 March 2018 and 26 March 2021, and sold within the five-year bright-line period; or
  • between 1 October 2015 and 28 March 2018, and sold within the two-year bright-line period.

It should be noted that the New Zealand government has confirmed that new builds will continue to be subject to a five year bright-line period. Additionally, the bright-line property rule also applies to New Zealand tax residents who purchase overseas residential properties.

Offshore Property Holders

A residential land withholding tax applies to an entity controlled by offshore persons, an offshore entity and to an offshore person (ie, including a non-resident and New Zealand citizen who has not been resident for three years, or a person who does not hold a resident visa or permanent resident visa) who buys a residential property located in New Zealand and sells it within two years (or within four years in the case of a trust with a beneficiary who is an offshore person). The seller’s main home exemption will not usually apply because the property is unlikely to be an offshore person’s main home if they do not live in New Zealand. 

The Overseas Investment Amendment Act 2018 has drastically changed foreign investment in New Zealand residential property. The main thrust of the Act is that it brings "residential land" within the definition of "sensitive land" for the purposes of the Overseas Investment Act 2005 (OIA). This means that the acquisition of residential land by overseas buyers will now require the consent of the Overseas Investment Office (OIO). Sensitive land also includes non-urban land over five hectares, land situated on most of New Zealand’s outlying islands, land adjacent to the foreshore and seabed, and land with special historical or environmental significance.

There are no gift taxes that would apply to transfers of assets. Usually, no tax planning mechanisms are required to transfer assets to heirs or between generations. 

Inter vivos and will trusts are the most popular family-succession planning vehicles used in New Zealand. 

New Zealand does not have a legal regulatory framework for succession of digital assets such as email accounts, cryptocurrency and blockchain. They are not recognised as currency or property by the Financial Markets Authority and Reserve Bank; however, they are treated as a form of personal property for tax purposes by the IRD.

There are, however, no legal barriers to transferring digital assets to the trustee of a New Zealand trust. Recent case law has confirmed that digital assets are capable of being added to the trust fund of a trust. Transferring digital assets to a New Zealand trust would entail transferring possession and legal title – ie, by providing the trustee with the means to obtain possession and legal title (such as usernames and passwords, etc).

Families who intend to come to New Zealand as permanent residents should take planning advice in advance of their coming to New Zealand. That way, they can establish pre-migration structures outside New Zealand which can be used to hold families’ overseas investments and property, and which need to be properly managed from a tax and accounting perspective once the beneficial owners become resident.


Both on and offshore trusts have been traditionally used as estate planning vehicles in New Zealand since the early 19th century. It is quite common for New Zealand families to hold their assets in trusts. In addition, a large number of New Zealand businesses and significant asset-holding enterprises are held or managed by trusts. 

New Zealand permits the use of private trust companies which have no special regulatory requirements, as there is no request for licensing or registration. Trusts are private documents and are not registered on a public register. 

Foreign trusts (ie, trusts which are established by a non-resident person) are not taxable on their overseas-sourced income. 

New Zealand trust law is well established, with a strong local jurisprudence and court knowledge. New Zealand trust law is derived from English law and is regulated by the Trusts Act 2019, which is a modern, coherent and useful statute which takes the most fundamental trust law principles from the common law and puts them into accessible legislation for all to understand. It does not codify all trust law but recognises the complexity, nuances and desire for continued development through case law.

New Zealand trust law has some unique features, including the ability to have trust advisors, protectors, investment advisers and managers, with wide discretionary powers and the ability to add and remove beneficiaries. A protector or investment manager, who again need not be New Zealand resident, can be given relevant advisory and discretionary powers.  

Limited Partnerships and Companies

The worldwide and New Zealand-sourced income of a company is taxed at 28%. 

A limited partnership is transparent for tax purposes. In determining its income tax liability, the general partner may attribute the partnership’s income, expenses, tax credits, rebates, gains and losses to the underlying partners in proportion to their partnership interests.

The partnership can be a useful offshore vehicle for a non-resident. Partnerships are generally recognised as separate legal entities under foreign law, and therefore can be useful in jurisdictions that do not recognise trusts. A foreign trust could act as the limited partner of the partnership and hold 100% of the partnership interests. The income generated by the partnership assets would therefore flow through to the trust in its entirety. The foreign trust would be eligible for all of the estate, wealth planning and other benefits these offshore trusts offer non-residents under New Zealand law.

A limited partnership consists of the usual general partner (GP) and a limited partner and a simple partnership agreement. The GP manages the business of the partnership and the limited partner takes a passive role to allow it to retain its limited liability. The limited partner's liability for the debts and liabilities of the partnership is limited to its capital contribution.

A limited partnership has the following characteristics:

  • it is registered with the New Zealand Companies Office (the partnership must keep its own register of limited partners at its registered office); 
  • it must have a New Zealand registered office;
  • it will require at least one GP that is New Zealand resident;
  • however, the limited partner need not be a New Zealand resident; and 
  • any legal person may be a GP or a limited partner. 


New Zealand does not have foundations laws so a foundation may not be established under New Zealand law. They may be recognised as an incorporated entity such as a company or limited partnership. They are commonly used as part of offshore structures for non-residents.

Trusts are recognised and respected in New Zealand. There are no forced heirship rules under New Zealand law, and there is no analogous legal category under which forced heirship concepts can easily be accommodated. In addition, New Zealand is not a signatory to the Hague Convention on trusts, and its courts are, therefore, not required to take into account the customary or legal requirements of foreign jurisdictions in relation to trusts. Consequently, attempts to enforce the judgment of a foreign court based on forced heirship principles against a New Zealand resident trustee would face significant hurdles. 

Generally, foreign structures which are established and funded by New Zealand tax residents, are taxed in New Zealand on their New Zealand-sourced and worldwide income. 

Where a New Zealand resident holds a controlling interest in a foreign company, the income of the controlled foreign corporation (CFC) will be attributable to that resident in proportion to their respective interest, unless 95% or more of the CFC’s income is derived from an active business enterprise, in which case an active participation exemption applies. Holdings in foreign companies, which are not controlled by a New Zealand resident (known as a Foreign Investment Fund or FIF), result in the attribution of the FIF’s income to a New Zealand resident shareholder in proportion to their shareholding, if those holdings are "attributing interests" for tax purposes. 

If a New Zealand tax resident receives beneficiary income from a domestic trust or foreign trust (with a non-resident trustee), foundation or similar entity, then the resident will in most cases subject those distributions to income tax.

Where a New Zealand resident serves as a fiduciary or trustee, they will need to consider disclosing the trust to the IRD. Under Foreign Trust Disclosure Rules, all foreign trusts with a non-resident settlor must be registered with the IRD. Thereafter, an annual return setting out the trust’s settlements and distributions must be filed along with financial statements within six months of the trust’s elected balance date. 

Domestic trusts that earn income must be registered with the IRD to obtain an IRD number, as this income is generally taxable in New Zealand. The annual income tax return of the trust will also include details of distributions of trustee and beneficiary income made to beneficiaries.

Unlike some offshore jurisdictions, the ability to reserve powers is not enshrined in the TA 2019. However, under trust law it is permitted for the settlor to draft a trust deed that confers powers on the settlor, protector and other third parties. It is common for settlors to reserve powers to appoint and remove the trustee. A settlor may retain the power to amend a trust deed.

The scope of power to amend the trust deed must be carefully drafted before the trust is established. Should the trustee or settlor propose an amendment in the future, such amendment must have been contemplated by the parties when the trust deed was made.

It is not recommended that a settlor retain extensive powers, as this may undermine the nature of the trust and make the arrangement appear to be a nominee arrangement between the settlor and trustee rather than a discretionary trust. 

In addition, in Clayton v Clayton (2016) NZSC 30, the Supreme Court followed the decision in Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Company (Cayman) Limited and others (2011) UKPC 17 in holding that reserved powers are property and therefore may be taken into consideration when reviewing the assets of a settlor in divorce proceedings.

The most popular method of protecting assets in New Zealand is through the use of trusts. Trusts are part of New Zealand’s culture and it is estimated that there are between 300,000 and 500,000 trusts operating in New Zealand, making it the highest concentration of trusts per capita, globally. 

While tax is not taken into consideration when establishing trusts, New Zealand does offer favourable tax treatment for trusts when compared with other jurisdictions. For New Zealanders settling assets into a trust, there is also no estate duty, gift duty, stamp duty or capital gains tax.

New Zealanders use family trusts to protect assets for beneficiaries from creditors, relationship-property claims, risky business ventures and lawsuits.

New Zealand domestic trusts are private and confidential. There is no public registry of trusts or an obligation to submit information to any government or public body if the trust earns no income.

New Zealand foreign trusts must be registered with the IRD; however, the register is not public and cannot be accessed by the general public. Any information registered with the IRD will only be disclosed if there is a valid request from a government authority in New Zealand or overseas under the relevant tax information exchange agreement entered into with that particular country. 

For these reasons, people may establish more than one trust to hold different assets for different benefits or beneficiaries.

Legal advisers and trust specialists know that family business succession planning can be a complex and emotional subject. Planning can take time and requires advisers to be patient with their clients, as the process can vary depending on the individuals involved and the assets they hold. 

Business succession planning is not only for large businesses or high net worth individuals in New Zealand. Business owners (whether of small or medium-sized businesses) are encouraged to create and implement a sound succession plan to ensure the business’s continuous and smooth transition to the next generation or the new owners. 

Accordingly, New Zealand company constitutions or limited partnership agreements may contain provisions allowing for business succession between shareholders. Commonly, these set out a mode of pre-emption on a notice of sale or the death of a partner or equity owner which enables that person’s share to be valued and disposed of to the continuing owners. 

An alternative method of business succession planning is through the use of trusts. The shares or participation in the company or partnership are held in a trust which is then distributed to family members or others at dates agreed by or fixed by the settlor. 

Business succession planning can also include the use of asset protection and estate-planning arrangements such as limited liability companies, wills and relationship-property agreements.

Transferring a partial interest in a New Zealand entity does not trigger tax consequences.

The market value of the interest is based on an accountant or business broker’s assessment of the overall value of the entity. However, since there are no tax consequences, valuations are merely done for accounting and other non-tax-related reasons. 

It is expected that the clarification of common law principles in the TA 2019 will help to avoid or reduce wealth disputes.

Information Disclosure Requirements

The TA 2019 has information disclosure provisions that cover the presumption for disclosure (and the exceptions) found in the New Zealand Supreme Court’s decision in Erceg v Erceg (2017) NZSC 28 which replaced the UK Privy Council’s decision in Schmidt v Rosewood Trust Ltd (2003) UKPC 26 as the leading authority in New Zealand for this issue.

The TA 2019 introduced a presumption under Section 51 that "... a trustee must make available to every beneficiary the basic trust information." The Bill defines "basic trust information" as:

  • the fact that a person is a beneficiary;
  • the name and contact details of the trustee;
  • the details of appointments, removals and retirements of trustees as they occur; and
  • the right of the beneficiary to request a copy of the terms of the trust or trust information.

Incorporating these principles into trust legislation adds nothing to the common law as it currently stands, it merely clarifies and creates certainty around the trustee’s "duty to disclose information".


There are three principal areas where concern has been expressed. Firstly, that beneficiaries may, in obtaining information, "attack" the trust and question the decisions of the trustees; secondly, that the interests and needs of individual beneficiaries may be different, and in some circumstances, the trustee may have concerns about advising the individual that they are a beneficiary; and thirdly, how a trustee can ensure the information reaches every beneficiary, given that classes of beneficiaries can be very broad.

However, the requirement to pass information to beneficiaries is not absolute; there are exceptions.

Section 53 provides for a list of 13 factors that the trustee must take into consideration before deciding whether it is appropriate to provide the information to the beneficiary. These factors are comprehensive, and if they do not provide the trustee with the reassurance it seeks, Section 53(m) allows them to consider "any other factors that the trustee reasonably considers are relevant to determining whether the presumption applies."

The same presumption to disclose information and its exception apply equally to the more in-depth "trust information" under Section 52. It is important to note that here, trust information does not include reasons for trustees’ decisions.

Section 54 covers the procedure that applies when the trustee decides not to provide the information. Here, the trustee must apply to the court for direction that the decision to withhold information was reasonable. However, under Section 54(3), if one beneficiary already has the basic trust information, this will not apply, and the trustee will be free to exercise its discretion not to provide the information to the other beneficiary(ies). (Clearly this will be satisfied where the settlor is also a beneficiary.)

Claims can be made by a limited partner against the general partner and other limited partners of a limited partnership, by shareholders against directors and by beneficiaries against trustees of trusts. Civil claims can be filed in the High Court.

Corporate fiduciary services are common in New Zealand with independent providers providing trustee and corporate services for local and international clients. However, given the trust culture, most trusts are administered by individuals or their personal lawyer or accountant. 

It is also common for private client law firms or accounting firms to provide corporate services and/or trusteeship. The conduct of fiduciaries and/or trustees is governed by the TA 2019 and various other legislation and principles derived from case law. 

Trustees are expected to take the same standard of care as an ordinary prudent person of business in the circumstances of a trust, act in the best interests of the beneficiaries and treat them in an even-handed manner. There is also a requirement that the trustee invests prudently, and the TA 2019 sets out a number of factors the trustee is required to take into account when making investment decisions. 

Professional trustees (corporate or otherwise) that are remunerated for their trustee services are expected to exercise a higher standard of diligence and knowledge than an un-remunerated trustee. This includes duties under the Financial Transactions Reporting Act 1996, where the trustee is required to report any unusual trust settlements or transactions and those under the Anti-money Laundering and Countering Finance of Terrorism Act 2009, where the trustee must conduct due diligence prior to accepting their trustee role.

It is possible to "pierce the veil" of companies and trusts in New Zealand in limited circumstances. 

The assumption in New Zealand is that trusts serve as a means by which settlors can protect their assets and preserve their capital for their benefit and that of future generations. However, the case is not the same when it comes to relationship property, with more and more trusts being attacked.

Relationship property is governed under the Property (Relationships) Act 1976 (PR Act), where the PR Act serves to achieve a fair division of property when a relationship comes to an end. Claims under the PR Act and claims of constructive trust pose challenges to trusts. 

In the recent case of Clayton v Clayton (2016) NZSC 29 and Clayton v Clayton (2016) NZSC 30, the Supreme Court ruled that powers to control a trust may constitute property under the PR Act. 

The PR Act can also apply in situations where a person has disposed of property into trust with the intention of defeating their partner's claims or rights under the Act. Under these circumstances, the court can recover property from the trust or order one partner to compensate the other to avoid serious injustice to one party.

Other remedies found in the law of equity include claims that a trust is invalid because it is a sham, alter ego or illusory trust or a claim that a trust is subject to a constructive trust for the benefit of one of the partners.

The TA 2019 imposes five mandatory duties on trustees which cannot be modified or excluded in the trust deed. The mandatory duties are:

  • a duty to know the terms of the trust;
  • a duty to act in accordance with the terms of the trust;
  • a duty to act honestly and in good faith;
  • a duty to act for the benefit of the beneficiaries; and
  • a duty to exercise powers for a proper purpose.

The TA 2019 also imposes ten default duties that must be performed by the trustee unless they are modified or excluded in the trust deed.

The default duties are:

  • a duty of care;
  • a duty to invest prudently;
  • a duty not to exercise powers for the trustee’s own benefit;
  • a duty to actively and regularly consider the exercise of the trustee’s powers;
  • a duty not to bind or commit trustees to a future exercise or non-exercise of discretion;
  • a duty to avoid conflict of interest between the trustee and the beneficiaries;
  • a duty of impartiality to beneficiaries (however it should be noted that impartiality does not necessarily mean equality as between beneficiaries);
  • a duty not to profit;
  • a duty to act for no personal reward; and
  • a duty to act unanimously.

Most existing trust deeds will already modify these default duties to some extent depending on the trust arrangement. 

Investing Prudently

The TA 2019 does not set out the different factors a trustee is required to consider when deciding on how to invest trust funds. However, the Act does not substantially change the trustees’ duty to invest prudently. Section 30 of the TA 2019 provides that “a trustee must exercise the care and skill that a prudent person of business would exercise in managing the affairs of others” and that, in exercising the duty, they must have regard to any special knowledge or experience they have or would be reasonable to expect them to have if they are acting as a trustee in the course of a business or profession.

The duty to invest prudently is included in the list of “default duties” under the TA 2019 which means a trustee has to invest prudently unless that duty is altered by the terms of the trust deed.

Prior to 1988, the trustee was required to invest in specific approved investments using the trust funds. By 1988 changes to the law abandoned the list of authorised investments and through the Trustee Amendment Act 1988 the "prudent person" standard was created which required the application of modern portfolio theory, where trustees are required to make investments that would increase trust income but minimise risks. 

Accordingly, the amendments to the law brought about portfolio management as the approved method of trust investment in New Zealand. Portfolio management is a recognised method of investment and one that satisfies the prudence test found in the Trustee Amendment Act 1988 (now repealed) .  

The TA 2019 permits the trustee to delegate its investment powers to professional investment advisers, something which most New Zealand trustees do if the trust is substantial and consists of financial assets, as opposed to the majority of trusts which tend to hold one primary asset, the family home.

Section 59 of the TA 2019 further continues the prudent person standard and adds two further considerations, which require the trustee to have regard to the objectives or permitted purpose of the trust and the trustee’s overall investment strategy.


New Zealand has several visa categories, some of which can lead to residency. The criteria for obtaining a visa for New Zealand is determined by the New Zealand government’s Immigration Policy. In setting out the Immigration Policy, the New Zealand government considers the competing forces of economic growth, cost to the state and security. 

The main categories for residency are as follows:

  • Business Category;
  • Family Category;
  • Skilled Migrants; and
  • Residence from Work.

The Business Category is best suited for those seeking to invest or operate a business in New Zealand. This category includes what are known as the Investor 1 and 2 categories and the Entrepreneur Work and Residence Visa.

Other pathways to residency are subcategories of the Skilled Migrant category and Residence from Work. 

Qualified and skilled migrants may be eligible for a work visa under the Long-Term Skill Shortage List Work category, the Regional Skill Shortage List, the Construction & Infrastructure Skill Shortage List, the Talent (Accredited Employers) Work category or the Skilled Migrants category.

All these categories have different requirements and applications can be made based on the applicant’s eligibility. Due to the impact of the COVID-19 epidemic, visa applications by applicants currently inside New Zealand are prioritised over applications where the applicant is overseas. 


Citizenship in New Zealand is administered by the Department of Internal Affairs and can be obtained by birth, descent or it can be granted. To be eligible for citizenship by descent, an applicant must have at least one parent who is a New Zealand citizen. To be eligible for citizenship by grant, an applicant must: 

  • have an intention to stay on in New Zealand;
  • have held residence status for five years prior to making an application for residence;
  • have a good understanding of English;
  • be of good character; and
  • have an understanding of the responsibilities and privileges of New Zealand citizenship. 

Once an application is approved, the applicant is invited to make an oath of allegiance or an affirmation of allegiance at a citizenship ceremony.

The Department of Internal Affairs may choose to interview an applicant prior to granting them citizenship.

An expeditious pathway to residency and citizenship can be through the Business Category (mainly the Investor 1 and 2 category visas). New Zealand’s investor visas are open for all investors who want to gain residence in New Zealand. 

Investor 1 Visa

To be eligible for an Investor 1 visa, applicants must: 

  • invest NZD10 million in an acceptable investment in New Zealand for three years; 
  • meet certain health and character requirements; and
  • stay in New Zealand for at least 44 days in each of the last two years of the three-year investment period or 88 days at any time over the three-year investment period if the investment is a minimum of NZD2.5 million in growth investments.

Investor 2 Visa

Eligibility for the Investor 2 visa is based on a points system that requires applicants to first submit an expression of interest to Immigration New Zealand. Provided the applicant satisfies the visa criteria, they are awarded points and are then invited to apply for residency. 

Points are awarded according to the applicant’s age, health, character, English-language capabilities, business experience and investment funds. Once invited to apply, applicants must:

  • invest a minimum of NZD3 million in New Zealand assets over four years; 
  • spend 146 days in New Zealand in each of the last three years of the four-year investment period or 438 days over the four-year investment period; 
  • have a minimum of three years' business experience;
  • have sufficient English-language ability; and
  • be under 65 years of age. 

Acceptable Investment

Applicants must prove investment funds were lawfully acquired by submitting high-level evidence, and New Zealand investments must fit the "acceptable investment" criteria, which can be:   

  • equity in New Zealand firms (public or private); 
  • bonds, issued by the New Zealand government, New Zealand local authorities or approved New Zealand banks, finance companies or firms; 
  • new residential property development that is not for the investor’s personal use and designed to make a commercial return on the open market; and
  • philanthropic investment (up to 15%). 

Overall, the investment must be capable of making a commercial return under normal circumstances, contribute to New Zealand’s economy and not be for the personal use of the investor.

Planning for minors and adults with disabilities is done through the use of trusts. Minors are protected through inter vivos trusts or inheritance trusts. Inheritance trusts provide certainty and security that assets will be held and protected for minors despite what the future may hold. These types of trusts offer benefits throughout the minor’s or disabled adult’s lifetime and assets held in trust can be distributed or applied for the benefit of the minors or disabled adults at any stage, even while the parents or caregivers are alive. 

Some of these trusts are established by a will and are accompanied by a letter of wishes setting out what the parents or caregivers wish to happen with the trust fund.

Parents of children (mothers and fathers) are automatically guardians of their birth child and are referred to as the child’s natural guardians. 

People other than the natural guardians can become legal guardians through an appointment via the Family Court.

Other than testamentary guardians, the arrangement of appointments of guardians is governed by the Care of Children Act 2004 (the CCA) and the Oranga Tamariki Act 1989 (the OTA). A person other than the natural guardians can apply to become a caregiver of a child or young person under the CCA. The Family Court may then appoint that person as a guardian either in addition to an existing guardian or as sole guardian. 

If a child is in need of care or protection, an additional guardian can apply to the Family Court for a guardianship order to be appointed as guardian. 

Testamentary guardians are those appointed by a will. The appointment takes place upon the granting of probate. Testamentary guardians have certain guardianship responsibilities in contributing to the child’s development, providing a safe and secure home, schooling, medical treatment and social aspects, such as language and culture. Responsibilities do not extend to providing day-to-day care for the child. If testamentary guardians wish to have the child in their care, they have to apply to the Family Court for a Parenting Order. 

As testamentary guardians can be appointed after the death of only one of the child’s parents, the testamentary guardian will then be a guardian alongside the surviving parent. Appointments can be challenged by the parent or existing guardian by way of an application to the Family Court.

People are encouraged to seek professional legal, financial and medical advice to plan ahead while they still have the legal capacity to do so and to sign documents. 

A popular arrangement is the use of Enduring Powers of Attorney (EPAs). EPAs are legal documents that can be set up for "personal care and welfare" and/or for "property". The document works while the donor is alive and allows someone else (the attorney) to act on their behalf if they cannot, or do not wish to, look after their own affairs. The attorney’s main responsibility is to act in the donor’s best interest. 

An EPA for personal care and welfare is set up to manage the donor’s personal health and well-being. The appointed attorney will look after things such as accommodation and medical decisions. This EPA is invoked when the donor is no longer capable of making or communicating their decisions, and can only be given to one individual. 

An EPA for property is set up to manage the donor’s financial affairs and assets. The donor can specify a certain date when they want the EPA to take effect if they wish to do so prior to becoming incapacitated. The donor can also give the appointed attorney full power over all their property, or limit the power to certain property. 

The arrangement is different from a will as it deals with decisions taken while the donor is still alive and only comes to an end by written notice to the attorney or once the donor dies . 

The person with powers of attorney can be a family member, a trusted friend or a professional such as a lawyer or accountant. For the elderly, an EPA can provide peace of mind that their well-being and property will be well looked after while they are alive. 

EPAs are very specifically dealt with under New Zealand law and clients are required to seek independent advice before granting anyone an EPA. They are also encouraged to speak to the people they intend to name as their attorneys. 

While other arrangements are recognised in New Zealand, an EPA under the laws of another country is unlikely to be recognised. Accordingly, migrants settling in New Zealand with New Zealand property, or those who may regularly spend time in New Zealand, are encouraged to make an EPA. 

In light of the COVID-19 epidemic, the government made certain changes under the Epidemic Preparedness (Protection of Personal and Property Rights Act 1988-Enduring Powers of Attorney) Immediate Modification Order 2020 to modify the requirements for signing and witnessing EPAs under Section 94A of the Protection and Property Rights Act 1988. The change now allows for EPAs to be signed and witnessed using audio-visual links as oppose to this being done in person. All people signing a copy of the EPA must make it clear on the copy that it is signed via an audio-visual link due to the current Epidemic Notice in force.

Without an EPA, loved ones and spouses must seek an order from the Family Court to deal with personal care and welfare. The order can be specific to an issue or it can appoint a welfare guardian to make general welfare decisions. 

The same can be done for property, where the Family Court appoints a property manager to make decisions on how assets are to be dealt with.

The adoption of children in New Zealand is governed under the Adoption Act 1955. Adopting a child in New Zealand requires the adoptive parents to make an application to the Family Court, and in most cases formal consent of the birth parents is required. 

If the child being adopted is not from New Zealand, then it is considered an inter-country adoption, which is governed under the Adoption (Inter-Country) Act 1997. 

New Zealand law considers the birth mother and her partner as the legal parents of a child. The birth parents are named on the child’s birth certificate and are the parents for all legal purposes. In order to become the legal parents of the child, the intending parents or guardians must file an adoption application and legally adopt the child. 

Accordingly, all laws relating to inheritance apply as if the child was born to the adoptive parents. 

Children born to a surrogate mother are considered to be her legal children. While surrogate pregnancy arrangements are recognised in New Zealand, commercial surrogacy is illegal. 

Under a surrogate pregnancy arrangement, the intending parents have no parenting rights over the child regardless of whether one or both of them donated their genetic material for the pregnancy.

Becoming the legal parents of the child requires the intended parents to file an adoption application through the Family Court. The court must also be satisfied that the intended parents are fit and proper people capable of adopting the child. The surrogate mother and/or her partner must consent to the adoption. 

Adopted children have the same inheritance rights from their adoptive parents as the biological children of those parents. The same applies for children who are born to parents outside the traditional arrangement of marriage. 

Adopted children have the right to receive property from their adoptive parents under New Zealand’s intestacy laws. For example, if a parent dies without a will or an estate plan, the adopted children have the same rights to the estate as the biological children. The Family Protection Act 1955 allows adopted children to claim against the estate if they are not adequately provided for in the will.

Unions of same-sex couples have been recognised in New Zealand since 2005 under the Civil Union Act 2004. 

In 2013, the definition of marriage found in the Marriage Act 1955 was extended to include same-sex couples and defined marriage as the union of two people, regardless of their sex, sexual orientation, or gender identity. Accordingly, same-sex marriage is recognised in New Zealand.

New Zealand’s tax treatment of charities encourages charitable giving, as it offers a tax deduction to the donor. Charitable organisations that are registered can be granted an exemption from income tax. 

Provided the charitable organisation is an approved donee, individuals can claim a 33.33% tax rebate on the amount they donate. Companies can also claim a tax deduction for donations made to an approved donee providing the claim does not exceed the company’s total annual net income. 

An approved donee is a non-profit organisation which can include a society, association or a group. The organisation can be incorporated or unincorporated. The activities of the organisation must not be conducted for profit or the gain of any member, and the rules of the organisation must not allow any money or property to be distributed to any member. Approved donees can also include overseas aid organisations.

Many people donate a portion of or all of their estate to charities whether through their family trusts or through their wills. Some also create charitable trusts through their will.

Charities in New Zealand can be set up and run through charitable trusts or incorporated societies. 

Charitable Trusts

Charitable trusts are subject to the same rules as any other trust. However, to be registered under the Charitable Trusts Act 1957, a charitable trust must exist for a charitable purpose. 

The trust must have a deed of trust or a document setting out the aims of the trust and how it will be run. It is important that there is a clear intention to donate property for a charitable purpose, which must be clearly defined as having a purpose for the benefit of the community. 

When making an application to register the charitable trust with the Registrar of Incorporated Society, it is important to show that the trust’s activities are lawful and there will be no personal gain from the assets of the trust by a private individual. 

The Charitable Trusts Act 1957 allows for trustees of a charitable trust to become incorporated as a charitable trust board. As a charitable trust board, it is easier for them to hold money or assets and carry out activities for charitable purposes, as they can limit their liability. Furthermore, they can have perpetual succession.

Incorporated Societies

An incorporated society is an organisation registered and incorporated under the Societies Act 1908. To be eligible for registration, the organisation must exist for a lawful purpose, not be primarily commercial in purpose and should not distribute profits to private individuals or shareholders, etc.

When registered, an incorporated society gains its own legal identity, which separates it from the identity of its members. This means its members are generally not personally liable for the society's debts, contracts or other obligations and the society can continue to exist as a legal entity even though its membership may change. 

Under the Societies Act 1908, an incorporated society cannot operate for financial gain and must have at least 15 members. The members must also have a set of rules that sets out in detail the purpose of the society, how it will be managed, how members can join, how meetings will be conducted and how its assets will be used and handled. 

An incorporated society can enter into contracts in its own name, purchase or sell property and borrow funds in its own capacity. 

If the incorporated society’s aim and purpose is exclusively for charitable purposes and its board of trustees, members or associates are operating a non-profit organisation, it can then register with the Charities Services, and apply to the IRD to have a non-profit tax exemption. 

The government passed the COVID-19 Response (Requirements For Entities-Modifications and Exceptions) Act 2020 to give charitable trusts and incorporated societies relief from certain obligations in their rules and make possible the use of electronic means including electronic voting and the use of electronic signatures when their constitution or rules wouldn't normally permit this. Furthermore, incorporated societies can also make certain modifications to their constitutions or rules if a majority of their governing officers believe it is no longer practicable to comply with certain provisions such as those that call for or hold meetings, rules relating to dispute resolution or waving, suspending, deferring or reducing fees payable by members.

Cone Marshall Limited

Floor 3
32 Mahuhu Crescent
Auckland 1010
New Zealand

+64 9 307 3950

+64 9 366 1482
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Trends and Developments


Hesketh Henry is a commercial law firm based in Auckland, New Zealand, with a sector-led focus. The Private Wealth Team comprises three partners, one senior associate and three solicitors. They advise clients on a wide range of services, with a focus on trusts and estates; establishing, administering and restructuring trusts and advising on trust structures; opinions on complex trust issues for existing clients of the firm and referrals from other law firms; preparing and advising on relationship property agreements and help in assisting in the resolution of relationship property issues; wills and advice on issues that arise relating to wills and estate planning; enduring powers of attorney; administering estates; trust disputes and advice on the establishment and operation of charitable trusts; and establishing family office structures and advice in managing these through the generations. The firm also has a significant practice acting for individuals and families dealing with a wide range of issues that affect their personal, property and business interests.


In 2020, private wealth professionals in New Zealand had to grapple with the immediate practicalities of working within the confines of a COVID-19 environment. A number of new laws were passed to enable business to continue while finance was uncertain and in-person meetings could not be held.

In New Zealand, the health outcome has to date been relatively successful, due in part to the country's elimination strategy. This has resulted in New Zealand enjoying freedom of movement within the country with relatively few periods of lockdown. As New Zealanders have returned to a more normal way of living, other factors have overtaken the immediate issues raised by COVID-19.

Trust Act 2019

The Trusts Act 2019 has been in force since January 2021. New Zealanders are getting used to the change in language that the new legislation has introduced. Cases relying on the Trusts Act 2019 (Act) are now beginning to be decided in the courts.

In a recent case in the High Court of New Zealand, Michael Anthony Talijancich & Ors v Lorraine Marise Talijancich & Ors [2021] NZHC 753, the trustees of a family trust for a high-profile New Zealand family sought several variations to the Trust Deed under the Act. The Court considered the application of Sections 121–125 of the Act, enabling it to vary the terms of a trust where there were beneficiaries who were not able to act on their own behalf. Although the considerations were relatively procedural it is helpful to practitioners for these sections to start to be considered by the courts and for the common law to start to develop under the Act.

Housing Crisis and Taxation Changes

The unprecedented levels of world-wide fiscal stimulus and the low interest rate environment continue to have an effect on issues which were present in the New Zealand landscape prior to COVID-19. There is a well-documented housing shortage in New Zealand, and it continues to a very high level of unaffordability, particularly for buyers of first homes in urban areas.

This is an issue which the current Labour government is trying to address through a number of policy levers, including taxation. In line with global moves towards greater transparency due to concerns over equality of taxation, trusts are also coming under increasing scrutiny in New Zealand. As real estate and trusts are inextricably linked in the New Zealand investment landscape, changes which affect one inevitably have an impact on the other.

New Tax Administration Act 1994 Provisions

New requirements

The most recent of these changes to come into force (from 1 April 2021) are changes which require active trusts to file detailed financial information with their tax return to the Inland Revenue Department (IRD).

From the 2022 tax year (1 April 2021 to 31 March 2022), trustees will need to file the following.

  • Financial accounting information, including profit and loss statements, balance sheet items and other information to be specified by the Commissioner (of the IRD).
  • Information on distributions and settlements made during the income year.
  • In respect of settlements in prior income years, there may be an obligation to disclose, as Section 59BA (2)(c) reads "or whose details have not previously been supplied to the Commissioner".
  • The information required for trust settlements will include identifying information for the settlor such as their name, country of tax residence, IRD or tax number and date of birth.
  • The information required for trust distributions will include identifying information for beneficiaries such as their name, country of tax residence, IRD or tax number and date of birth.
  • Identifying information (country of tax residence, IRD or tax number and date of birth) for each person having a power under the trust to appoint or dismiss a trustee, to add or remove a beneficiary or to amend the trust deed.

There is also a wide catch-all provision in Section 59BA(2)(f) – "the other information required by the Commissioner". As at the date of publication (August 2021) the final IRD form has not been set, so there may be other reporting requirements.

Collection of information

Section 59BAB further provides that the Commissioner may request information relating to periods from 1 April 2014. This obligation only applies to trusts to which the Section 59BA reporting requirements apply. The information also has to be in the knowledge, possession or control of the trustee. Therefore, if the Commissioner is requesting information in relation to a distribution to a beneficiary prior to the 2022 tax year, the trustees may be able to respond that the necessary information was not collected at the time of the distribution.

If documenting any settlement or distribution from 1 April 2021, practitioners are well advised to collect the necessary information directly from the settlor or beneficiary at the time of the transaction. This is because chasing the information later when tax returns are due may prove difficult. There is also likely to be increased documentation around settlements and distributions because the person disclosing the information to the IRD will be the trustees. It will therefore be prudent to have the settlor or beneficiary provide the information in writing, confirm the information is true and correct and also acknowledge that the information will be disclosed to the tax authority.

There may also be an obligation to collect this information under the OECD's Common Reporting Standard (CRS) and if so, such disclosures should also be acknowledged.

Increasing awareness of the source of trust equity

The changes to the Tax Administration Act 1994 will necessitate a change to how trust accounts in New Zealand are prepared. The source of trust equity is no exception. Trust equity in most New Zealand trust balance sheets is presented as a one or two-line item. This alone tells the trustees very little about the source of trust equity.

Practitioners in New Zealand who have been involved with a trust making distributions to an offshore beneficiary will know that it is important to understand what is being distributed. Is it surplus income? Capital gains? Corpus settled on the trust?

The changes to the rules represent an opportunity to better reflect the source of trust equity, which should be separated into the following five key components:

  • initial settlement sum;
  • further settlements received;
  • revaluation reserve (to reflect increases in valuation of assets);
  • capital reserve (realised accumulated capital gains); and
  • retained earnings (accumulated revenue after taxation).

Both trustees and professional advisors to New Zealand trusts will be able to make more informed decisions relating to distributions and other trust matters when the source of trust equity is clearly presented and tracked. Distributions to beneficiaries that are foreign tax residents can benefit from clear division of trust equity components. This information is also extremely useful if there is an analysis of the trust in respect of claims under the Property (Relationships) Act 1976 for the purposes of a separation. What assets have been settled on the trust and when did that occur?

Non-active trusts

These reporting requirements will not apply to non-active trusts. So, if a trust only holds the family home, which does not generate any income, the reporting is not required. The requirements also do not apply to foreign trusts, charitable trusts and Māori Authorities. Of course, foreign trusts have a separate reporting requirement, and it may well be that the form is similar to that for a foreign trust annual return.

New 39% Tax Rate for Individuals

The anticipated consequence from the extensive borrowing required to support the country's economy during COVID-19 was an increase in the personal tax rate. This has been confirmed and from 1 April 2021 individuals who earn over NZD180,000 are required to pay income tax on the amount exceeding that sum at a rate of 39%.

This leaves a gap between the trustee tax rate of 33% and the individual top tax rate of 39%.

The government has warned that it will be looking carefully at behaviour resulting in the exploitation of that difference and that the general anti-avoidance provisions will apply. The reporting requirements for active trusts under the Tax Administration Act are one of the "integrity measures" that the IRD has adopted. The government has left it open to increase the trust tax rate to 39% as well if it considers that trusts are being used to divert funds towards trust income rather than individual income. Some of the work around these measures has not yet been concluded as the government also announced further reform in the taxation of capital gains resulting from residential housing in April 2021 which is designed to further dampen down speculation in the housing market.

Extension of the Bright-Line Test

The "bright-line" rules apply to the buying and selling of residential property in New Zealand. Any uplift in value on the transfer of residential property is taxable where the property has been acquired in one of three periods.

The first period is between 1 October 2015 and 28 March 2018, where the property is sold within the two-year bright-line period. The second period is between 29 March 2018 and 26 March 2021, where the property is sold within the five-year bright-line period.

From 27 March 2021, property which is acquired and sold within a ten-year bright-line period will be captured, subject to certain exemptions. The government has indicated that one of those exemptions will be if the property is a "new build". In that case the applicable bright-line period will still be five years. However, the definition of a "new build" has not yet been finalised and is currently under consultation. Generally, it is proposed that residential property would be considered a new build if it is a self-contained dwelling (ie, with its own kitchen and bathroom, and one that has received a code compliance certificate).

The bright-line rules impact on residential property held through a trust because a transfer from one trust to another (or to an individual) generally resets the bright-line period. The change from five to ten years has given trustees more pause for thought when considering whether to restructure trusts which hold residential property that is not the main home of the settlor. In New Zealand, many people hold second or third homes through a trust which would not qualify as a main home.

A home property held in trust may qualify for the main home exemption, but only if the persons residing in the property are also the main settlors of the trust. These rules are therefore affecting how families choose to fund and provide housing for their family members.

Removal of Interest Deductibility

At the same time as it announced the extension of the bright-line period, the government also proposed that interest deductibility on a mortgage on a residential investment property (acquired before 27 March 2021) will be gradually phased out (as to 25% each year) between 1 October 2021 and 31 March 2025. Given the historic leverage that was available to property investors this will have a significant impact on non-professional investors who have used borrowings to acquire their residential investment property.

The new rules are proposed to apply to the following taxpayers using loans to acquire residential property:

  • trusts, partnerships and limited partnerships;
  • close companies (where five or fewer people own more than 50% of the company), including look-through companies; and
  • any company where residential property makes up more than 50% of its assets and individuals.

The change to the interest deductibility rules is currently under consultation.


The impact of COVID-19 and the changes to government policy to try and ensure a stable domestic economy continue to have an effect on trends and developments in private wealth in New Zealand. The heavy reliance in New Zealand on residential real estate as an asset class for investment and the preponderance of trusts among property owners ensures that any policy adjustments affecting property owners will have an outsize impact on how trusts are considered and used.

Hesketh Henry

Level 14
188 Quay Street
Auckland 1010
New Zealand

+64 9 375 8700

+64 9 309 4494
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Law and Practice


Cone Marshall Limited is a law firm providing global and independent legal, advisory and fiduciary services, comprised of lawyers, trust officers, wealth planners and accountants. It specialises in trusts, wealth and asset management, succession planning, tax planning and fiduciary services. The firm advises on how to securely and efficiently structure wealth and plan for its succession to future generations, and it aims to meet clients' needs, whether domestic or international, individual, family or business. The team has special skills in resolving conflicts of law across multiple legal systems. Formed in New Zealand in 1998, Cone Marshall has expanded into a global group, which now administers trusts and related entities across multiple jurisdictions, with offices in the USA (New York, Wyoming and Florida), Hong Kong, Montevideo, São Paulo, Geneva, Lugano, London, Milan, Athens and Tortola, British Virgin Islands.

Trends and Development


Hesketh Henry is a commercial law firm based in Auckland, New Zealand, with a sector-led focus. The Private Wealth Team comprises three partners, one senior associate and three solicitors. They advise clients on a wide range of services, with a focus on trusts and estates; establishing, administering and restructuring trusts and advising on trust structures; opinions on complex trust issues for existing clients of the firm and referrals from other law firms; preparing and advising on relationship property agreements and help in assisting in the resolution of relationship property issues; wills and advice on issues that arise relating to wills and estate planning; enduring powers of attorney; administering estates; trust disputes and advice on the establishment and operation of charitable trusts; and establishing family office structures and advice in managing these through the generations. The firm also has a significant practice acting for individuals and families dealing with a wide range of issues that affect their personal, property and business interests.

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