NEW ZEALAND Law and Practice Contributed by: Greg Ambler and Elizabeth Heaney, Tompkins Wake
5.2 Testamentary Dispositions Estate duty in New Zealand was abolished for all deaths on or after 17 December 1992, and there has been no indication that it will be reinstated. Execu- tors must file the deceased’s final tax return (using the deceased’s IRD number), ensure all outstanding tax is paid, and then file separate tax returns for the estate (using a new IRD number) until it is fully administered and wound up. Before distributing assets, all estate income must be returned and any tax paid. Under Subpart FC of the Income Tax Act 2007, transfers of assets and liabilities on death are generally treated as deemed disposals and acquisitions at market value, subject to certain exceptions. With no gift duty payable in New Zealand, it is com- mon for individuals to carry out gifts during their life- time to reduce the assets in their personal name, and thereby reduce the risk of a successful/significant claim on their estate once they have died. A court’s ability to make awards under the Family Proceedings Act 1955, and the Law Reform (Testamentary Promis- es) Act 1949 is limited to the assets of the deceased’s estate, subject to limited legislative methods in which a court can enlarge an estate to meet claims. In recent years, certain claims have been brought in which adult children have argued that their deceased parent owed them a fiduciary duty to protect their eco- nomic interests by providing for them, and seeking the court to remedy the breach by recognising a construc- tive trust in favour of the claimant child. Recently, an inter vivos gift to a discretionary trust was set aside in the High Court when it was held the donor breached his fiduciary duty to his children. Here his duty was to “refrain from sexually or physically assaulting them” and the court held at the time of the gift he owed each of the plaintiffs a duty to recognise them as members of his family and to provide for them from his wealth, due to the vulnerability [that] his earlier breach of fiduciary duties had caused them. The case made its way to the Supreme Court (which confirmed 6. Lifetime Succession Planning Mechanisms 6.1 Common Planning Techniques Inter Vivos Gifts
These rates are progressive: • 10.5% on income up to NZD15,600; • 17.5% on income between NZD15,601– NZD53,500;
• 30% on income between NZD53,501–NZD78,100; • 33% on income between NZD78,101–NZD180,000; and • 39% on income over NZD180,000. An additional 45% rate applies where the taxpayer has not provided the required notification. From 1 April 2021, New Zealand introduced a 39% top tax rate for individuals earning over NZD180,000. Inland Revenue was also given stronger information- gathering powers, meaning trust tax returns must now include extra details about the trust’s income, financial position, distributions and settlements. Tax on Capital Gains New Zealand has no general capital gains tax, but res- idential property sold within a set “Bright line” period may be taxed. The Bright line period was five years for properties bought between 27 March 2018 and 26 March 2021, increased to ten years for most prop- erties acquired on or after 27 March 2021, and later shortened to two years from 1 July 2024. Exemptions apply for a person’s main home, and rollover relief is available for some ownership transfers. New Zealand is one of the only OECD countries without a comprehensive capital gains tax, which continues to fuel a long-running public and political debate, often canvassed in the lead-up to New Zea- land elections. One part of society recognises that a capital gains tax is necessary to make the tax system fairer, more efficient, more fiscally sustainable and in line with international norms, and the other part of society believes that it would dissuade investment in New Zealand, discourage immigration, slow economic growth, and impose unnecessary complexity on tax- payers. In New Zealand, there is no stamp duty, land tax, wealth tax or specific healthcare tax (being otherwise funded from general taxation).
135 CHAMBERS.COM
Powered by FlippingBook