Sensible to exempt some trusts

The Herald reports:

Finance Minister Nicola Willis has revealed the Government wants to exempt some trusts from paying the new 39 per cent trustee tax rate. …

However, the industry group Chartered Accountants Australia New Zealand repeatedly made the point that most trusts earn less than $180,000 a year, so taxing them at the rate applied to individuals’ income above $180,000 would be unfair.

It noted that according to Inland Revenue, only 11 per cent of the trusts required to make disclosures in the 2022 tax year received taxable income above $180,000.

The group accepted it was “entirely fair” for these trusts to be taxed at 39 per cent, noting they earned a whopping 81 per cent of the income.

However, it believed applying the 39 per cent rate across the board would cause “significant collateral damage”.

Taxing all trusts at 39% would be unfair.

The best policy would be to drop the top tax rate to 33% of course. But until that happens, then a two their trust tax rate may be the best option.