Structures
A trust separates who controls an asset from who benefits from it. That separation only holds if the trust is actually run like one.
What it is
A trust is a relationship, not a company. A settlor puts assets in, trustees hold and control them, and beneficiaries are the people who may benefit. The trust deed is the rulebook, and it outranks whatever everyone assumed.
Income is taxed in one of two places. What the trustees retain is taxed as trustee income; what is properly distributed to a beneficiary is taxed in that beneficiary’s hands at their rate. Deciding which, and doing it before year end with a resolution to show for it, is most of the annual work.
Trusts are also under far more scrutiny than they were. New Zealand’s Trusts Act modernised trustee duties and beneficiary rights, and Inland Revenue now requires detailed annual disclosures from most domestic trusts — settlements, distributions, and a proper balance sheet.Trusts are also under far more scrutiny than they were. The ATO watches distributions closely, particularly where they are made to a family member on a lower rate who never actually receives the money.
A trust that is never administered — no minutes, no resolutions, assets used as though they were still the settlor’s — is the one most likely to be looked through when it matters. The paperwork is not bureaucracy; it is the evidence the trust is real.
Typically Family trusts holding a home, a rental, a business or investments.
Every year
The obligations that come with this structure, in the order they tend to catch people out.
An IR6, plus the disclosures Inland Revenue requires from most domestic trusts — including a balance sheet and a record of settlements and distributions.The trust return, with each beneficiary’s share of the income reported.
Assets, liabilities and income for the year. Required for the disclosures, and the only way trustees can honestly say they know what they are holding.
Whether income is retained or distributed, to whom, and recorded in a resolution. Made afterwards, it is a story rather than a decision.
Distributed income goes into the beneficiary’s own return and is taxed at their rate. That has to line up with what the trust filed.
Trustee decisions recorded, the deed and any variations kept somewhere findable. Every bank, lawyer and accountant will ask for it eventually.
The return, the financial statements, the disclosures and the resolutions are one annual job. We do them properly, before balance date where it matters, and we will tell you plainly if the trust has stopped earning its keep.
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Plenty of people run more than one of these at once — a company and a trust, or a job and a rental. We handle the set, not the piece.
Freelancers, contractors, tradies and anyone trading under their own name.
Read it →Founders, family businesses and anyone who has incorporated or is about to.
Read it →Two or more people in business together — trades, professional practices and couples running something jointly.
Read it →Anyone with a rental — one property, a portfolio, or a holiday home let out part of the year.
Read it →Ten minutes to start. No credit card, and we will tell you if you are better off elsewhere.
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Not sure which structure you are in, or whether it is still the right one? Ask.
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