Investing Through A Trust Calculator

The tax case for holding investments in a trust changed in 2024 and a lot of received wisdom has not caught up. Until then the trustee rate was 33 percent against a top personal rate of 39, so simply parking income inside a trust sheltered six percentage points of it. The trustee rate is now 39 percent as well, which means retaining income in a trust achieves nothing on tax while still costing whatever your accountant charges each year. What survives is the ability to distribute income to beneficiaries taxed at lower rates, and that produces a large advantage over a long horizon where such beneficiaries genuinely exist. This page projects all three routes side by side over decades: held personally, held in a trust and retained, and held in a trust and distributed. It taxes only the income portion of the return rather than the whole thing, because New Zealand has no general capital gains tax and treating growth as taxable would overstate every difference on the page. It deducts the compliance cost every year and lets it compound, which is what turns a modest annual charge into a serious drag across twenty or thirty years. And it handles portfolio investment entities separately, because that is where the intuition fails hardest: a PIE is capped at 28 percent for an individual and for a trustee alike, so the trust cannot win on tax and the compliance cost makes it a straightforward loss. None of this settles whether you should have a trust, since tax is not why most trusts exist and this page prices none of the reasons that are.

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The Old Reason To Use A Trust Has Gone

Before the 2024-25 income year, trustee income was taxed at 33 percent while the top personal rate was 39. Holding investments in a trust and leaving the income there sheltered six percentage points, every year, with no distributions required.

The trustee rate is now 39%. On the worked example, retaining income in the trust produces $1,145,322.61 against $1,192,085.12 held personally, which is $46,762.51 worse, entirely because of the compliance cost.

Any advice suggesting a trust shelters investment income at a lower rate is describing the position before April 2024.

Worked Example: $500,000 Over Twenty Years

A 6.00% total return of which 4.00% is taxable income, and $1,500.00 a year of compliance.

Held personally at 39%: $1,192,085.12, having paid $243,165.04 of tax.

Trust, distributing to a beneficiary on 17.5%: $1,353,349.74, having paid $116,668.83 of tax and $30,000.00 of compliance.

Trust, retaining: $1,145,322.61.

The distributing route is $161,264.62 ahead. The retaining route is $46,762.51 behind. Same trust, same portfolio, opposite outcomes.

Only One Route Wins, And It Has Conditions

Every dollar of the advantage comes from distributing income to someone taxed less heavily than you. That requires three things to be true at once.

A beneficiary on a genuinely lower rate must exist. If everyone in the picture is on 39%, there is nothing to gain.

The distribution must be real. Properly resolved, and actually paid or credited to the beneficiary, who is then entitled to that money. It is not a bookkeeping entry.

They must not be under 16. The minor beneficiary rule generally taxes distributions from a trust settled by a relative to a beneficiary under 16 as trustee income at 39%, which removes the saving entirely. Our child investment account calculator covers investing for children directly.

If any of those fails, the relevant row is the retain row, and the trust is costing you money.

For A PIE, The Trust Simply Loses

This is the case most people holding managed funds are actually in, and the answer is unambiguous.

A trustee investing in a multi-rate PIE can use a 28% prescribed investor rate, which Inland Revenue states is a final tax. An individual's PIR is capped at 28% too. The rates are the same.

So the trust changes nothing about the tax and adds $30,000.00 of compliance over twenty years, ending $48,974.53 behind. The gap is larger than the compliance paid because the money taken each year would otherwise have compounded.

Our trust compliance cost break-even calculator finds the portfolio size where the tax saving covers the cost, and for PIE income that size does not exist.

Tax Only The Part That Is Taxed

A common error in this comparison is treating the whole return as taxable. New Zealand has no general capital gains tax, so growth in the value of shares is generally not taxed on sale for someone genuinely investing rather than trading.

The worked example assumes 6.00% total return with 4.00% taxable, so a third of the return never enters the tax calculation at all. Entering 6.00% as taxable would inflate every difference on this page by roughly half.

Our trust tax calculator handles the tax on a given amount of trustee income in isolation.

Compliance Compounds Too

An annual charge of $1,500.00 sounds minor against a half-million-dollar portfolio, and over twenty years it is $30,000.00 of direct cost plus everything that money would have earned.

That is why the retain route ends nearly $47,000.00 behind despite paying almost identical tax, and why the PIE route loses more than the raw compliance figure.

Over thirty years the effect is larger again. If a trust is being kept for reasons that no longer apply, that cost is running quietly in the background.

What Should Actually Decide This

Asset protection. Succession and what happens on death. Keeping assets together across generations. Providing for someone who cannot manage money themselves. Those are the reasons trusts exist and this page prices none of them.

A trust can be entirely the right structure while every number here is negative. What the calculation tells you is whether tax is helping the case or quietly working against it, which is worth knowing before you assume it is helping.

And if the underlying question is simply whose name an investment should be in, our joint vs individual account calculator covers that far simpler decision.

Related NZ Trust and Structure Calculators

• Trust Compliance Cost Break-Even Calculator: the portfolio size where it pays.
• Trust Tax Calculator: tax on trustee income in isolation.
• Joint vs Individual Account Calculator: the simpler ownership question.
• Child Investment Account Calculator: investing for children directly.
• PIE PIR Rate Calculator: confirm the rate that applies to you.
• Family Trusts and the 39% Rate NZ: the background to this calculation.
• What Is a Trust and Do You Need One?: background on this topic.