Income Tax Act 2007

Distributions from trusts

HC 14 Distributions from trusts
Transfers of value

(1)

A trustee makes a distribution when the trustee transfers value to a person because the person is a beneficiary of the trust.

Transfers to other trusts included

(2)

Despite subsection (1), a settlement for the benefit of a beneficiary is treated as a transfer of value only—

(a)

if the amount or the property being settled would have been beneficiary income of, or a taxable distribution to, a beneficiary, had it been distributed at the time to a beneficiary resident in New Zealand; or

(b)

when sections EW 50 or EZ 39 (which relate to forgiveness of debt) applies, if the property being settled is an amount forgiven and treated as paid as described in section EW 44(1) or (2) (Consideration when debt forgiven for natural love and affection) or EZ 39(1).

Payment of interest at rate above market rate not distribution

(2B)

If a trustee pays to a beneficiary interest on an amount owed to the beneficiary, the payment is not a distribution by the trustee except to the extent to which the interest exceeds the amount given by the rate that is the greater of the market rate and the prescribed rate of interest.

When distribution made

(3)

A distribution is made when what is transferred—

(a)

vests absolutely in interest in the person; or

(b)

is paid to the person.

Manner of distribution

(4)

A distribution may be made directly or indirectly, or by 1 transaction or a number of transactions, whether related, connected, or otherwise.

Nil value of beneficiary relationship

(5)

The fact that a person is, or will become, a beneficiary of a trust does not constitute the giving or receiving of value.

Defined in this Act: amount, beneficiary income, distribution, interest, pay, prescribed rate of interest, resident in New Zealand, settlement, taxable distribution, transfer of value, trustee

Compare: 2004 No 35 s OB 1 “distribution”

Section HC 14(2B) heading: inserted, on 23 March 2020, by section 136(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

Section HC 14(2B): inserted, on 23 March 2020, by section 136(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

Section HC 14 list of defined terms interest: inserted, on 23 March 2020, by section 136(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

Section HC 14 list of defined terms prescribed rate of interest: inserted, on 23 March 2020, by section 136(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).