Investment tax implications March 2024…



18 March 2024

By Wayne Blomfield

– Trustee tax rate to increase

– Reintroduction of interest deductibility

The proposal to raise the trustee tax rate to 39% in New Zealand is imminent and is something taxpayers and financial experts need to be aware of.

Whilst it is not yet law, we fully anticipate the increase in the Trustee tax rate to 39% will apply from the start of the 2024/25 tax year. This will be from 1 April 2024 for most Trusts.

This proposed tax hike will affect income earned by trusts, which are commonly used by New Zealanders to protect their assets.

At present, the trustee tax rate stands at 33%. The proposed increase in the trustee tax rate to 39% is aimed at ensuring trusts pay their fair share of tax and aligns with the top personal tax rate of 39%, which applies to individuals earning over NZD 180,000 per year.

The Government has indicated it wants to exempt low-earning trusts from the tax hike. It is proposing to allow trusts that earn less than $10,000 a year continue to be taxed at 33%, leaving those that earn more to be taxed at the new trustee rate on all their income.

The Chartered Accountants Australia New Zealand (CAANZ) group would have preferred an exemption for trusts that earn less than $100,000, but accept that a $10,000 threshold will at least prevent over-taxation of 45 per cent of trusts. It noted that in the 2021-2022 tax year, only 11 percent of trusts had taxable income of more than $180,000 (the level above which individual income is taxed at 39%).

However, the Finance & Expenditure committee had feared that a threshold higher than $10,000 would prompt people to set up multiple trusts and spread their assets across such to avoid paying the higher tax rate. Complicated anti-avoidance provisions would consequently need to be included in the law.

Critics argue that the increase in the trustee tax rate will have unintended consequences. For instance, it may discourage people from setting up trusts altogether, which could have negative effects on estate planning and asset protection.

It should be noted that depending on the provisions of the trust deed, trustees can pay or allocate taxable income to beneficiaries as beneficiary income, which is then taxed at the beneficiary’s personal tax rate.

An option for trustees is to consider the structure of the trust’s investments. For example, managed funds in the form of Portfolio Investment Entities (PIEs) are subject to a maximum tax rate of 28%, materially lower than the 39% tax rate that will apply to taxable income for other trust investments. That said, tax is not the only consideration as investments need to be appropriate for the purpose of the trust and the investment strategy of the trustees.

If you need help in structuring your trust’s investments or simply want a second opinion, get in touch with us. We’d be happy to assist.


The government has also recently announced plans to reintroduce interest deductibility on rental properties. This move has generated a lot of buzz among property investors, economists, and the wider public.

What is Interest Deductibility?
Interest deductibility allows property investors to deduct the interest paid on their mortgages from their taxable income. This means that investors can reduce their tax liability by claiming the interest they pay on their rental property loans as an expense. .

Why was it Removed?
In March 2021, the government announced that it was removing the ability to claim interest deductibility on rental properties. The decision was made as part of a wider effort to cool down the housing market and make property more affordable for first-time buyers. The government argued that the policy was unfair as it gave property investors an advantage over other taxpayers, and it also contributed to rising house prices by incentivising property investment.

The removal of interest deductibility was met with mixed reactions. While some welcomed the move as a step towards a fairer tax system, others criticised it for unfairly targeting property investors. Many investors saw the policy change as a significant hit to their cash flow and profitability, making property investment less attractive.

What does the Reintroduction of Interest Deductibility Mean?
In 2023, the Act and National Parties campaigned to reintroduce interest deductibility on rental properties. The reintroduction of interest deductibility means that property investors will once again be able to claim the interest they pay on their rental property loans as an expense, and reduce their tax liability as a result. This will make property investment more attractive, and it is expected to stimulate demand for rental properties.

However, residential property investors won’t get immediate relief. Rather than phasing out the interest limitation rule in the current tax year, the Government has stated it will start being phased out in the year to 31 March 2025. The Government will keep the rules as they are for the current tax year, then allow investors to write off 80% of their mortgage interest in the March 2025 year and all of their interest in the March 2026 year.

What does it Mean for the Property Market?
The reintroduction of interest deductibility is expected to have a positive impact on the property market in New Zealand. Property investors will once again be able to claim interest as a tax deduction, which will make rental properties more profitable and attractive to investors. This is likely to lead to increased demand for rental properties.

It is important to note that the reintroduction of interest deductibility will not benefit all property investors equally. Investors with high levels of debt and low rental yields are likely to see the most significant benefits, while those with low levels of debt and high rental yields may see little change.

While property investing is popular amongst New Zealand investors, it is just one option to consider. At Saturn Advice, we recommend investors diversify their investments across asset classes including fixed interest, shares and property, both domestically and internationally. If you need help with your investing or want to check you are on the right track, get in touch with us.


The views expressed in this article are the views of the author. The information provided is of general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances