Income Tax Act 2007

Settlors and their liabilities

HC 27 Who is a settlor?
When this section applies[Repealed]

(1)

[Repealed]

Meaning of settlor

(2)

A settlor of a trust is a person who, at any time,—

(a)

transfers value—

(i)

to the trust; or

(ii)

for the benefit of the trust; or

(iii)

on terms of the trust:

(ab)

provides, for less than market value, services to the trust or for the benefit of the trust that are more than incidental to the operation of the trust:

(b)

provides financial assistance to the trust or for the benefit of the trust with an obligation to pay on demand, and the right to demand is not exercised or is deferred:

(bb)

is a beneficiary of the trust who is owed money by the trustee and does not meet the requirements of subsection (6):

(c)

is treated as a settlor under section HC 28.

Trusts for retirement benefits for employees

(3)

Despite subsection (2), a person resident in New Zealand who makes a settlement on a trust as an employer for the benefit of 1 or more employees is not a settlor of the trust if the following circumstances apply:

(a)

the trust is established or created mainly to provide retirement benefits to natural persons; and

(b)

the trust is neither a foreign superannuation scheme nor a superannuation fund.

Employee share purchase agreements[Repealed]

(3B)

[Repealed]

Contributions to foreign superannuation scheme

(3C)

Despite subsection (2), a person who makes a contribution to a trust that is a foreign superannuation scheme is not a settlor of the trust.

Resettlements

(3D)

Despite subsection (2), a trustee of a trust (the head-trust) who is resident in New Zealand and settles an amount on a second trust (the sub-trust), or makes a distribution to, or on terms of, the sub-trust, is not a settlor of the sub-trust if, when the settlement or distribution is made on or to the sub-trust,—

(a)

a settlor of the head-trust exists and each settlor of the head-trust is a non-resident; or

(b)

no settlor of the head-trust exists and the last surviving settlor of the head-trust was a non-resident when that settlor ceased to exist.

Indirect settlement

(4)

A person may make a transfer of value, or provision of financial assistance, referred to in subsection (2) directly or indirectly and by 1 transaction or a number of connected transactions.

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.

Beneficiaries owed money by trustee

(6)

When a trustee of a trust owes an amount to a beneficiary of the trust, the beneficiary does not become a settlor of the trust under subsection (2) solely as a result of being owed the amount if—

(a)

the amount owing at the end of the income year is not more than $25,000:

(b)

the amount owing at the end of the income year is more than $25,000 and the trustee pays to the beneficiary, for each income year in which the amount is owing and by the date given for the income year by section HC 6(1B), interest on the amount at a rate equal to the prescribed rate of interest or the market rate.

Determining amount owed to beneficiary

(7)

For the purposes of subsection (6), the amount of money owing to a beneficiary at the end of an income year is the amount of the debt at that time, adjusted to include the effect of transactions that are—

(a)

made after the end of the income year and by the date given for the income year by section HC 6(1B); and

(b)

included in the financial statements of the trust for the income year.

Defined in this Act: amount, assessable income, Commissioner, distribution, employee, employer, foreign superannuation scheme, income, income year, interest, non-resident, pay, prescribed rate of interest, resident in New Zealand, settlor, share, superannuation fund, transfer of value, trust rules, trustee

Compare: 2004 No 35 ss HH 1(10), OB 1 “settlor”

Section HC 27(1) heading: repealed (with effect on 1 April 2014), on 24 February 2016, pursuant to section 186(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section HC 27(1): repealed (with effect on 1 April 2014), on 24 February 2016, by section 186(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section HC 27(2)(ab): inserted (with effect on 1 April 2008), on 18 March 2019, by section 211(1) (and see section 211(5) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section HC 27(2)(ab): amended, on 18 March 2019, by section 211(2) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section HC 27(2)(bb): inserted (with effect on 1 April 2020), on 30 March 2021, by section 88(1) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).

Section HC 27(3): substituted (with effect on 1 April 2008), on 6 October 2009, by section 264(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section HC 27(3B) heading: repealed, on 29 September 2018, pursuant to section 115(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section HC 27(3B): repealed, on 29 September 2018, by section 115(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section HC 27(3C) heading: inserted, on 1 April 2014, by section 84 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).

Section HC 27(3C): inserted, on 1 April 2014, by section 84 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).

Section HC 27(3D) heading: inserted, on 18 March 2019, by section 211(3) (and see section 211(6) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section HC 27(3D): inserted, on 18 March 2019, by section 211(3) (and see section 211(6) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section HC 27(4): replaced, on 23 March 2020, by section 141(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

Section HC 27(6) heading: replaced (with effect on 1 April 2020), on 30 March 2021, by section 88(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).

Section HC 27(6): inserted, on 1 April 2020, by section 67(1) of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 (2019 No 33).

Section HC 27(6): amended, on 1 April 2020, by section 141(2)(b) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

Section HC 27(6)(a): replaced (with effect on 1 April 2020), on 30 March 2021, by section 88(3) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).

Section HC 27(6)(b): replaced, on 1 April 2020, by section 141(2)(c) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

Section HC 27(6)(b): amended (with effect on 1 April 2020), on 30 March 2021, by section 88(4) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).

Section HC 27(7) heading: inserted (with effect on 1 April 2020), on 30 March 2021, by section 88(5) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).

Section HC 27(7): inserted (with effect on 1 April 2020), on 30 March 2021, by section 88(5) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).

Section HC 27 list of defined terms amount: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HC 27 list of defined terms assessable income: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HC 27 list of defined terms Commissioner: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HC 27 list of defined terms consolidation rules: repealed (with effect on 1 April 2014), on 24 February 2016, by section 186(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section HC 27 list of defined terms distribution: inserted, on 18 March 2019, by section 211(4) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section HC 27 list of defined terms income: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HC 27 list of defined terms income year: inserted, on 1 April 2020, by section 67(2) of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 (2019 No 33).

Section HC 27 list of defined terms interest: inserted, on 1 April 2020, by section 67(2) of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 (2019 No 33).

Section HC 27 list of defined terms non-resident: inserted, on 18 March 2019, by section 211(4) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).

Section HC 27 list of defined terms prescribed rate of interest: inserted, on 23 March 2020, by section 141(3) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).

Section HC 27 list of defined terms share: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section HC 27 list of defined terms share purchase agreement: repealed, on 29 September 2018, by section 115(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section HC 27 list of defined terms trustee: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).