Trusts and charities - it's all in the timing

This brief update deals with trusts and with the latest news on the Charities Register:

Trusts

If you are involved with trusts, you will be familiar with the fact that besides the benefit of having trustee income taxed at 33% (as opposed to the maximum marginal rate for individuals of 39%), income distributed to a beneficiary is taxed at their rate – which may be at 19.5%.

A typical example would be a family trust where children (who must be at least 16 years old) might have income distributed to them from the trust and they may be on a 19.5% rate.  Clearly a significant saving. 

However, to benefit from this, income needs to be distributed to the beneficiary, and it has been common practice to do this by 30 September in relation to the previous 31 March tax year.

Under the current (2004) Income Tax Act, the 30 September date is not a fixed date.  It is a date which is no later than six months after the end of the trust's balance date.

So, if the trust has a balance date other than 31 March, distributions to beneficiaries would need to be made before 30 September or, if the trust's balance date is after 31 March, there may be more time in which to do so.

Charities

The Charities Commission has announced a delay in the opening of the Charities Register. 

As a result, charitable organisations will now have more time to consider whether to register under the Charities Act 2005.  The Commission advises that organisations will still have at least 12 months to register (presumably from the time the register actually opens) before any existing income tax or gift duty exemptions are affected.

If you have been diligent and completed the forms from the website, you need to hold off sending them in.

The Commission advises that it does not wish to receive your applications yet and the website forms are still only in draft and may change before the Register opens!

For further information, please contact your usual Bell Gully advisor or:

AUCKLAND

Mathew McKay
Partner

Willy Sussman
Partner

John Bassett
Senior Associate

David Simcock
Consultant


Disclaimer

This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.