Top tax rate of 39% - coming soon to a taxpayer near you
Yesterday the Government introduced new legislation raising the top income tax rate to 39%. Parliament sat under urgency and is expected to pass the new bill into law today (3 December).
Effective from next year (ie, from 1 April 2021 for those with a standard balance date), the new tax rate will apply to individuals with an annual income exceeding $180,000. The 39% rate applies only to that portion of income exceeding $180,000.
The Government’s concern that trusts, with their 33% tax rate, might be used to as a conduit by wealthy taxpayers to avoid paying the higher 39% rate, has resulted in more onerous disclosure provisions for trustees in their annual tax return, namely:
- financial accounting information, including profit and loss statements and balance sheet items
- loans to related parties
- information on distributions and settlements made during the income year (including identifying information for beneficiaries such as their name, IRD number, date of birth and tax jurisdiction)
- names and details of settlors from prior years (if not already disclosed to Inland Revenue)
- names and details of each person who, under a trust deed, has the power to appoint/dismiss a trustee, to add/ remove a beneficiary, or to amend the trust deed.
Read the Taxation (Income Tax Rate and Other Amendments) Bill and commentary here.