For the 2024/2025 tax year the rate of tax for a trust has increased from 33% to 39%.
What are the exceptions to the new rule?
De minimis trusts
To prevent potential over-taxation, trusts with trustee net income profit not exceeding $10,000 (that is, after expenses and distribution of income to beneficiaries) qualify as de minimis trusts and are subject to the 33% tax rate on trustee income.
It is important to highlight that if a trust's net income exceeds $10,000, the entire income is taxed at 39%, rather than just the portion exceeding $10,000.
Beneficiaries of Trusts
When you earn income as a trust beneficiary, your tax obligation is determined by your personal tax rate rather than that of the trust. This means that, even though changes in the trust tax rate may affect the trust directly, beneficiaries will still pay taxes according to their own tax brackets on income received from the trust. An exemption to this is where a beneficiary receiving a distribution from the trust is under 16 years of age. If the distribution for the minor exceeds $1,000 it is taxed at 39%.
Other exemptions
• Estates remain at 33% for the year of death and the following three income years.
• Disabled beneficiary trusts remain at the 33% rate instead of the personal tax rates of disabled beneficiaries.
• Energy consumer trusts and legacy superannuation funds to be excluded from the 39% tax rate.
Our team is here to answer any questions you may have regarding your trust, advise you on implications of the new tax rate and propose strategies to minimize unnecessary tax liabilities. Don't hesitate to reach out if you have any questions or require assistance—we're here to support you every step of the way.