NEW ZEALAND Law and Practice Contributed by: Greg Ambler and Elizabeth Heaney, Tompkins Wake
which makes trust ownership, gifting and corporate restructures relatively efficient.
The Trusts Act 2019 represents the most significant modernisation of trust law in over 60 years, clarify- ing trustee duties, expanding disclosure obligations and increasing compliance expectations. This has prompted trustees and advisers to review existing structures to ensure they meet the Act’s heightened governance standards, or consider whether a trust is required at all. In addition, changes to tax settings, such as increases to the trust tax rate and expanded Inland Revenue dis- closure requirements under the Taxation Act 2017 and subsequent reforms, have to some extent reduced the desire for holding assets in a trust. These devel- opments have created both opportunities for more transparent, better-governed trust administration and obstacles for those relying on trusts primarily for tax efficiency or minimal compliance structuring. Overall, the current environment favours well-man- aged, purpose-driven trusts but imposes greater scrutiny, reporting obligations and trustee account- ability, affecting how families choose and maintain trust structures and, in some cases, influencing the choice of jurisdiction for those with cross-border con- siderations. There remains a market for using overseas jurisdic- tions for alternative structures which might provide for greater confidentiality, more attractive tax settings, predictable court interpretation and fewer compliance requirements, and a highly mobile society makes this more common and practical. However, this must be balanced with the risks of consistent scrutiny on these jurisdictions. 10. Fiduciary Regulation, Standards and Taxation 10.1 Corporate and Professional Fiduciaries In New Zealand, corporate trustees of private family trusts are not required to hold a licence. Any person or company capable of holding property can act as a trustee under the Trusts Act 2019, unless the trust deed specifies otherwise.
9. Trusts, Foundations and Related Entities 9.1 Choice of Planning Vehicle The majority of trusts used in New Zealand are private trusts, which usually afford the trustees complete dis- cretion as to which of the beneficiaries receive assets from the trust and in what proportion. Occasionally, income-only trusts are used, or income trusts with discretionary access to capital (for exam- ple, through the establishment of a life interest in a will). Generally speaking, trusts are established during the lifetime of the settlor, but some may be established within a will (a “testamentary trust”) which ultimately has the same effect as an inter vivos trust. Charitable trusts are another common entity used in New Zealand. These are trusts that have a charitable purpose under New Zealand Law. The Charities Act 2005 sets up the system for registering and monitor- ing charitable trusts in New Zealand. A trust must be registered with the Charities Board to receive chari- table tax status. The charitable purposes of this type of trust must meet the legal definition of “charitable purposes” and satisfy several other requirements. These include that: • the trust’s funds cannot provide private financial benefit to trustees; • each trustee must confirm that they are qualified to act as an officer of a charity; and • the trust’s winding-up clause must ensure that any remaining funds go only to charitable purposes, not private or non-charitable use. 9.2 Recent Developments Affecting Planning Vehicles Recent developments in New Zealand have influenced the benefits and practical considerations of planning with trusts and related structures.
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