Trust tax changes called unnecessary
The two main points of the budget which impact on the financial services industry were:
- More talk about pre-funding the state pension, New Zealand Superannuation
- Legislation is to be introduced to require trust distributions of beneficiary income to minors to be taxed at the 33 per cent trustee rate.
(Full details of the superannuation elements of the budget, and extracts from Dr Cullen's speech and background paper are included in SuperTalk ).
PricewaterhouseCoopers taxation services partner John Shewan describes the changes to trust tax law as being "ill-thought through, ad hoc and unnecessary".
He says the change is major, and the magnitude of its impact is comparable to the Government's changes in Accident Compensation and industrial relations.
Shewan says the Government appears to be making a false presumption that all trusts are being established and used to avoid tax.
"They are using a sledgehammer to crack a nut."
The reality is that there are tens of thousands of trusts in existence and in many instances they are being used for legitimate reasons, not tax minimisation.
People with trusts are being left in a state of uncertainty, he says, as the budget provided no detail about the changes.
Dr Cullen is reported as saying the changes are expected to raise between $10 million and $15 million.
Perpetual Trust managing director Stephen Eaton says the move is not surprising as the Government has said it will be closing tax loopholes.
He says trusts shouldn't be established for income-splitting purposes anyway.
To read super stories click on either of the following links:
Making Forward Provision for the Ageing Population
Fiscal Implications of Population Ageing
WHAT DO YOU THINK OF THE BUDGET?
