Since 1 April 2024, the trustee tax rate in New Zealand is 39%, matching the top personal rate. This fundamentally changed the calculus for families deciding how to hold income. This calculator models the same pool of income through three structures simultaneously: personally (at PAYE rates), through a trust (retained at 39% or distributed to beneficiaries), and through a company (28% corporate rate with dividend extraction). The result shows exactly which structure produces the highest after-tax return for your specific income level and family situation.
Enter your income pool and existing income to compare personal, trust, and company tax outcomes
Before 1 April 2024, the trustee tax rate was 33%, matching the third-tier personal income tax rate. This created a significant tax planning opportunity: a family trust could retain income at 33% even when the settlor or principal beneficiary was on a 39% personal rate. The 6-percentage-point gap gave trustees meaningful tax deferral benefit.
That gap is now closed. The trustee rate increased to 39% from 1 April 2024. Retaining income inside a trust now costs more tax than earning it personally for anyone whose total income (including the trust income) would fall in any bracket below 39%. A trust earning $100,000 retained at the trustee rate now pays $39,000 in tax, whereas the same income distributed to a beneficiary earning no other income would attract only $13,020 in tax. The decision of whether to retain or distribute has never been more financially consequential.
While retained trust income is now expensive at 39%, the power of family trusts for income distribution to lower-earning beneficiaries remains intact. The 39% trustee rate applies only to income retained in the trust. Income distributed to a beneficiary is assessed at that beneficiary's marginal rate, which could be as low as 10.5% for a beneficiary with no other income.
A trust with $100,000 of income distributing to a non-working partner or adult child pays only $13,020 to $17,500 in tax, versus $39,000 if retained or up to $39,000 if the principal earner took it personally. The tax saving from optimal distribution is $21,500 to $25,980 on a $100,000 income pool. Over a decade, at 5% growth, this amounts to hundreds of thousands of dollars in additional family wealth.
The key risk to watch: IRD scrutinises distributions to minor children (under 16) and may apply the income attribution rules that effectively tax these distributions at the settlor's rate. Distributions to adult beneficiaries with genuinely low incomes are generally accepted. Get specific advice from a tax accountant on the robustness of your distribution plan.
A New Zealand limited company pays income tax at 28% on its net profit. This is lower than any personal marginal rate above 17.5%, which creates a potential tax deferral benefit: profit retained in a company grows at the 28% tax rate rather than the higher personal rate. Only when the profit is extracted as salary or dividends does personal tax apply.
When a company pays a fully imputed dividend (having already paid 28% company tax), the shareholder receives an imputation credit for the tax already paid. If the shareholder's marginal rate is 33%, they pay an additional 5% top-up (33% minus 28%). If their marginal rate is 17.5%, they receive a refund of the excess imputation credits. This means the total effective tax on company income extracted as dividends equals the shareholder's marginal rate, the same as personal income. The company structure does not save income tax on extraction, but it does save ACC (dividends are not subject to the ACC earner's levy), and it allows deferral of personal tax by retaining profits inside the company.
For income earning families where one person is in a high tax bracket and the other (or adult children) earns little: a trust with optimal distribution is typically the most tax-efficient structure, often by a wide margin. The distribution benefit can easily exceed $20,000 per year on a $100,000 income pool.
For business owners operating as sole traders or contractors who do not have family members to distribute to: a limited company can still offer ACC savings and the ability to retain income at 28% rather than the higher personal rate, with the personal tax deferred until extraction. This is especially valuable for someone building a business over multiple years.
For employees who cannot practically change how their income is earned: the personal scenario is the starting point, and other strategies (salary sacrifice, KiwiSaver contributions, charitable donations) are the available levers.
The tax savings from a trust or company structure need to be weighed against the compliance costs. A family trust requires annual financial statements, a trust deed, minutes recording trustee decisions, and typically an annual accountant fee of $1,500 to $3,000 or more depending on complexity. A limited company requires annual returns to the Companies Office, annual financial statements, and accounting fees typically starting at $2,000 to $4,000 per year for a simple trading company. Both structures involve legal costs to set up.
If the estimated annual tax saving is $3,000 and the annual compliance cost is $3,500, the structure produces a net cost rather than a benefit. This calculator does not model compliance costs because they vary widely, but they are a critical part of the decision and should be discussed with an accountant before establishing any structure.
Distributions to minor children (under 16) are subject to the income attribution rules if the income originates from the settlor's personal exertion (business income, salary etc.). In practice, most distributions to minor children from trusts are taxed at the settlor's marginal rate, eliminating the income-splitting benefit. Distributions from investment income held in trusts have different rules. Get specific advice from a tax accountant before planning distributions to minors.
No. You can retain profits inside the company at the 28% company tax rate indefinitely. You only pay personal tax when you extract the money as salary or dividends. This deferral is one of the key advantages of a company structure: income that stays in the company continues to compound at the 28% after-tax rate rather than at the lower after-personal-tax rate. The personal tax is effectively deferred until you need the cash.
This depends on the rental income level and who the beneficiaries are. For families with a high earner and low-income beneficiaries, a trust often provides the best income distribution flexibility. For people wanting asset protection and the ability to retain rental income at a lower rate, a company (limited liability) has advantages. Many property investors hold properties in companies or LPTs (look-through companies) for different reasons. This is a complex area and worth a specific conversation with a property-focused accountant or lawyer.
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