The Government is going ahead with its threat to put a 33% tax on the distribution by trusts to beneficiaries under 16 years.

The bill on this is expected to be in place from the start of the 2001-2002 income year. It is having its 1st reading today.

This is another "consequential" from the extra 6 cents tax put in place last December.

The bill only applies to trusts where a settlor is a relative of the beneficiary. Anyone over 16 years old is now out of this net because of the Human Rights Act .

The odd effect of this legislation is that it encourages people to give money to children directly , rather than using a Trust. This is because money in bank accounts (and the withdrawal of interest) is completely outside the punitive regime.

Surely the government realises that there are good non-tax reasons for preferring to use a trust?

Annabel Young MP National Party Spokesperson on Revenue National Party List MP responsible for Wellington Central and Rongotai Do you want to be added to my tax email group? Have a look at my tax web-site http://www.tax.org.nz

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