SearchTrust beneficiary taxes
Sasheen asks:
(updated on Friday, January 18th 2019)
What would be tax rate be if a Trust becomes the shareholder of an LTC and the beneficiaries are children under 16? Will the tax rate change if the children are over 16? The LTC is making profit.
Our Experts Answer:
I presume your question is contemplating what happens if the trust is in receipt of the look through income distributed to young beneficiaries. If a trust retains its income the trust rate of tax is 33%. If it distributes it to a beneficiary under 16 the beneficiary is also taxed at 33% on all income above $1000. Only the first $1000 attracts tax at the beneficiaries marginal tax rate.
If the beneficiary is over 16 and on a low income, then this income is all taxed at their own marginal rates which may be substantially lower than the trust rate.
A word of warning though - when you distribute income from a trust to take advantage of lower beneficiary tax rates, the day will come when those beneficiaries will ask for the money so, despite the tax saving, make sure you are willing to hand over the money or use it for the furtherment or betterment of the beneficiary.
Most Read
| Unity First Home Buyer special | 3.99 |
| SBS FirstHome Combo | 3.99 |
| TSB Special | 4.39 |
| Co-operative Bank - First Home Special | 4.39 |
| ICBC | 4.39 |
| SBS Bank Special | 4.49 |
| Unity Special | 4.49 |
| ANZ Special | 4.49 |
| Westpac Special | 4.49 |
| Kiwibank Special | 4.49 |
| Co-operative Bank - Owner Occ | 4.49 |
| ICBC | 4.59 |
| ANZ Special | 4.69 |
| TSB Special | 4.69 |
| BNZ - Std | 4.69 |
| Wairarapa Building Society | 4.79 |
| Nelson Building Society | 4.87 |
| Westpac Special | 4.89 |
| Co-operative Bank - Owner Occ | 4.89 |
| Kiwibank Special | 4.89 |
| SBS Bank Special | 4.89 |
| Unity Special | 4.89 |
| ICBC | 5.19 |
| Westpac Special | 5.29 |
| TSB Special | 5.29 |
| BNZ - Std | 5.29 |
| SBS Bank Special | 5.69 |
| Co-operative Bank - Owner Occ | 5.69 |
| Kainga Ora | 5.69 |
| ASB Bank | 5.69 |
| AIA - Go Home Loans | 5.69 |
| Kiwibank Special | 5.79 |
| Westpac | 5.89 |
| SBS FirstHome Combo | 3.29 |
| AIA - Back My Build | 3.34 |
| SBS Construction lending for FHB | 3.74 |
| CFML 321 Loans | 3.95 |
| Co-operative Bank - Owner Occ | 4.99 |
| Co-operative Bank - Standard | 4.99 |
| Heartland Bank - Online | 5.30 |
| ICBC | 5.39 |
| Kiwibank - Offset | 5.65 |
| Kiwibank | 5.75 |
| Unity Standard | 5.79 |
