Trust tax rate change
Wondering what's the deal with the trustee tax rate jumping to 39% from April 1st? You're definitely not alone in this boat.
So, here's what we know so far : this tax rate change is part of a bigger piece of legislation. Right now, it's still under review by the Finance & Expenditure Select Committee. They're not expected to report back until March 29th, 2024, which pretty much means the law won't be passed by the time the new tax rate is supposed to kick in.
But, don't stress too much. Realistically, for most people, this won't affect your income until the year ending March 31st, 2025, with tax returns not due until March 31st, 2026. So, we've got a bit of time.
Our advice? Act as if the tax rate change is a done deal. For trustees, this means preparing for a possible 6% tax hike on income for the 2024-25 year, unless you've shifted your income-generating assets into a company structure (which, by the way, the IRD has hinted is ok to do). Or, if you're distributing income to beneficiaries who are on a lower tax bracket than 39%, that's another way to navigate this change.
Brightline period changes
On a related note, there are some other changes in the wind, like cutting the residential land bright-line period to two years, bringing back interest deductions for residential land, and scrapping depreciation deductions for commercial buildings.
If you're thinking about selling residential land and you've owned it for more than two years, my tip is to hold off doing anything until after July 1st. That's when the bright-line period is supposed to drop, meaning if you sell after that date, you might not trigger the bright-line tax.
Interest Deductibility Changes
And about the interest deductibility? There's talk that it might go back to 100% right away from the 2023-24 income year. But take that with a grain of salt until we get the final word.
So, we're all in a bit of a waiting game, hoping the government will fill us in soon so we can get our ducks in a row. Stay tuned, and I'll keep you posted with any updates!
