Legislation has been passed amending the definition of “associated persons” in the Income Tax Act 2007. Trustees are now associated with a trust if they hold the power to appoint or remove trustees. One of the consequences is that a trustee who is a dealer, developer or builder will “taint” the trust with that status (and vice versa). Once tainted, income tax may be payable on the sale of property that was acquired after becoming tainted.

In particular, your independent trustee could “taint” your trust by its association with dealers, developers and builders. I recommend your trust deed is reviewed; it may need to be varied to exclude anyone who is not a beneficiary of your trust from holding the power to appoint or remove trustees. That would help prevent this “tainting”. Alternatively you may like to consider appointing a trustee company set up primarily for this purpose as your independent trustee, rather than appointing an individual.

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