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Issues paper on trust-tax law changes

23 June 2000

The Government is seeking submissions on the details of implementing its proposal to tax distributions of trust beneficiary income to minors at a minimum rate of 33%. The associated issues paper is available here. Submissions close on 24 July.

Hon Dr Michael Cullen
Minister of Revenue


Government to consult on trust-tax law changes

The Government is seeking public input on the details of implementing its proposal to tax distributions of trust beneficiary income to minors at the rate of 33 percent.

An issues paper seeking submissions on aspects of the proposal has been placed on two government web sites for the purpose, Revenue Minister Michael Cullen said today.

"Trust beneficiary income that is claimed to be income of children is, in substance, often not theirs," Dr Cullen said. "For example, in the 1998 income year about 3,500 children under the age of six received a total of more than $27 million in beneficiary income from things like business activities. This figure excludes interest and dividend income distributed by trusts. It is absurd to argue that an average of $7,700 in income attributed to these very young children should qualify for tax rates meant to apply to people on low incomes."

"I announced in the Budget speech that the Government will introduce legislation to tax trust distributions to minors at 33 percent, rather than at the minor's marginal tax rate, which can be 19.5 percent. The purpose of this legislation is to limit the tax benefits of using a trust as a device for splitting income with minors."

"I also announced that we were considering allowing limited exclusions to this new rule. A possible exception, for example, would be court-ordered trusts."

"The issues paper seeks public submissions on how the Government's policy should best be implemented. In particular, it seeks views on suitable exceptions to the minor beneficiary rule, how the term 'minor' should be defined, and associated operational matters."

"The public has until 24 July to let us know their views. After submissions have been considered, we hope to include the proposal in a bill to be introduced in October. Once enacted, the measure will come into effect from 1 April next year."

"I therefore encourage all those who want to express their view on these matters to take advantage of the consultative process," Dr Cullen said.

The issues paper is on the web site of the Policy Advice Division of Inland Revenue at and the web site of the Treasury at

Contact: Patricia Herbert [press secretary] 471-9412 or 025-270-9013