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Beneficiary income

This category contains 5 posts

Is it tax avoidance to distribute to the beneficiary best able to benefit?

QB 15/11: Income tax – Scenarios on tax avoidance – 2015 gives examples where trustees of a discretionary trust take into account the tax position of the beneficiaries when making decisions about distributions of beneficiary income; and finds that this is not tax avoidance.   However, there are some important caveats, and the question to consider when any … Continue reading

Favouring beneficiaries on a lower tax rate

Inland Revenue has issued a QWBA (QB 15/11)  regarding whether a trustee exercising a discretion to distribute trustee income (that would be taxed at the trustee rate of 33% if retained by the trustee) to a beneficiary on a lower tax rate, a beneficiary with tax losses or a beneficiary to whom the income will … Continue reading

Deemed income – beneficiary income or not?

Inland Revenue has released Interpretation Statement 12/02: Income tax – Whether income deemed to arise under tax law, but not trust law, can give rise to beneficiary income. Interpretation Statement 12/02 (IS12/02) confirms the Commissioner’s view (outlined last year in IS1110: see Tax law review of whether deemed income is beneficiary income) that in some circumstances, … Continue reading

Trustees now have greater discretion regarding RWT credits

Historically, absent a specific anti-avoidance provision, trustees have been unclear as to whether resident withholding tax (RWT) credits must be allocated in proportion to interest income or if the credits could be “streamed” for better effect. A recent amendment to the Income Tax Act 2007 has clarified the position and now provides that a trustee can … Continue reading

Tax law review of whether deemed income is beneficiary income

When a trustee derives income for tax law purposes due to the application of deeming provisions it is not always clear whether that deemed income can be distributed as beneficiary income.  An interpretation statement released today for discussion purposes considers the tax treatment where income is derived for income tax purposes but not trust law purposes. … Continue reading