Trust Compliance Cost Break-Even Calculator

Trusts became meaningfully less useful for tax in 2024, and a lot of the advice written before then has not caught up. The trustee rate moved from 33 percent to 39 percent for the 2024-25 income year, which aligned it with the top personal rate and removed the simplest reason to hold investments in a trust: retaining income there no longer shelters it from anything if you are on the top rate. What remains is the ability to distribute income to beneficiaries who are on lower rates, and that produces a genuine saving where such beneficiaries exist and the distributions are real. Against that sits an annual compliance cost that does not care how much you hold, so the question becomes a break-even: how large does the portfolio need to be before the saving covers the accountant. This page answers that, and it separates out the case that matters most to anyone holding managed funds, because a portfolio investment entity is taxed differently again. A trustee investing in a multi-rate PIE can use a 28 percent prescribed investor rate, and an individual's rate is capped at 28 percent as well, so a higher earner pays the same either way and the trust delivers no tax benefit whatsoever on that money. The honest answer for a lot of people is that a trust is not yet worth it on tax, or will never be for the assets they hold. That does not make a trust wrong, because tax is not the main reason most trusts exist, and this page prices none of the reasons that are.

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Retaining Income No Longer Shelters It

Until the 2024-25 income year, trustee income was taxed at 33 percent while the top personal rate was 39 percent. Holding investments in a trust and leaving the income there was worth six percentage points.

The trustee rate is now 39%, matching the top personal rate. On the worked example, retaining $20,000.00 of income in the trust costs $7,800.00, which is exactly what holding it personally costs.

A great deal of trust advice predates that change, and the simplest version of the tax argument for a trust no longer works.

Worked Example: $400,000 At A 5% Taxable Yield

Taxable income of $20,000.00 a year, against a 39% personal rate and a $1,500.00 annual compliance cost.

Held personally: $7,800.00 of tax.

Trust, retained: $7,800.00. No saving.

Trust, distributed to a beneficiary on 17.5%: $3,500.00, saving $4,300.00.

Less the $1,500.00 compliance cost, the trust is $2,800.00 a year ahead, and the break-even portfolio is $139,534.88.

The Saving Depends Entirely On Having Someone To Distribute To

Every dollar of the benefit above comes from the first row of that table. Without a beneficiary on a genuinely lower rate, the trust saves nothing and costs $1,500.00 a year.

And a distribution is not a bookkeeping entry. It has to be properly resolved, and actually paid or credited to the beneficiary, who is then entitled to that money. Specific rules restrict distributions to minors, and general anti-avoidance provisions apply where an arrangement exists mainly to reduce tax.

So the honest version of the question is not "would distributing save tax" but "do I have an adult beneficiary on a lower rate who I am genuinely willing to give this money to". If the answer is no, the first row does not apply to you.

For A PIE, There Is No Saving At All

This is the finding that matters most for anyone holding managed funds, and it runs the other way to what people expect.

A trustee investing in a multi-rate PIE can choose a prescribed investor rate of 0%, 17.5% or 28%, defaulting to 28%, and Inland Revenue states that at 28% it is a final tax. An individual's PIR is capped at 28% as well.

So a higher earner pays 28% whether the fund is held personally or in a trust. The trust changes nothing about the tax and adds the compliance cost, which on the worked example makes it $1,500.00 a year worse off.

There is a more complex route, using a 0% PIR so the income flows into the trust return and can then be distributed, and it is not modelled here because it interacts with the trustee rate and the distribution rules in ways that need an accountant rather than a calculator.

Watch The $10,000 Cliff

Trustee income of $10,000 or less is taxed at 33% rather than 39%. It is a cliff, not a threshold: at $10,001 the entire amount is taxed at 39%, not just the extra dollar.

That makes the region just above $10,000 of retained income unusually expensive. A trust retaining $10,000.00 pays $3,300.00; retaining $10,001.00 pays $3,900.39, which is $600.39 more for one extra dollar of income.

Where retained income sits near that line, the timing of income and distributions is worth planning deliberately.

None Of This Is Why Most Trusts Exist

Asset protection, succession, keeping assets together across generations, providing for someone who cannot manage money themselves: those are the reasons trusts are used, and this page prices none of them.

A trust can be entirely the right structure while showing a negative number here. What the calculation tells you is whether tax is contributing to the case or quietly working against it, which is worth knowing either way.

It also says nothing about the obligations. Trustees have duties under the Trusts Act 2019 covering record-keeping, disclosure to beneficiaries and the management of trust property, and those apply regardless of how large the portfolio is.

Before Acting On This

Setting up a trust, winding one up, or moving investments in or out of one are all decisions for a lawyer and an accountant. The numbers here are an input to that conversation, not a substitute for it.

If you already have a trust and hold PIE investments in it, the useful thing to check is simply that the prescribed investor rate is right, since a wrong rate costs more than this whole decision. Our PIR overpayment recovery calculator works out what a wrong rate has already cost.

And if the question is really about whose name an investment should be in rather than whether to use a trust, our joint vs individual account calculator covers the simpler version of the same decision.

Related NZ Tax and Structure Calculators

• Joint vs Individual Account Calculator: the same question without a trust.
• PIE PIR Rate Calculator: confirm the rate that applies to you.
• PIR Overpayment Recovery Calculator: what a wrong PIR has cost.
• PIE Savings vs Bank Savings Calculator: how PIE and ordinary income differ.
• Managed Fund Fee Drag Calculator: fees, which often cost more than structure.
• Family Trusts After the 39% Rate: why the $10,000 threshold is a cliff, and whether to keep the trust.