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For the better part of two decades, New Zealand trusts were marketed to Australian clients as a near-perfect offshore vehicle. The pitch was compelling: an English-speaking, common law jurisdiction with no capital gains tax, no estate duty, a generous foreign trust exemption, and a short flight from Sydney.
Then the rules changed. The Trusts Act 2019 rewrote the disclosure landscape, and the Common Reporting Standard gave the ATO visibility it did not previously have. Much of the old-school advisory industry moved on.
But here is what most advisers missed: the changes did not kill the New Zealand trust. They killed one specific use case: the opacity play. What remains is a genuinely useful vehicle for the right client, in the right circumstances, structured with an understanding of both what has changed and what has not.
Why New Zealand Trusts Were Popular
The appeal rested on several pillars:
- The foreign trust exemption. Under the New Zealand regime, a trust settled by a non-resident with a New Zealand-resident trustee is classified as a "foreign trust." Foreign trust income sourced from outside New Zealand is not subject to New Zealand income tax. This meant an Australian could settle a trust in New Zealand, appoint a New Zealand corporate trustee, and the trust's non-New Zealand investment income was untaxed in New Zealand.
- No capital gains tax. New Zealand has no general capital gains tax (subject to limited bright-line rules for residential property). For trusts holding growth assets, this remains a significant advantage over many jurisdictions.
- Privacy. Trust deeds were private documents. There was no public register of trusts or beneficiaries.
- Familiarity. New Zealand trust law is based on English common law principles. Australian lawyers and accountants can read and understand the documentation without needing to grapple with civil law concepts.
- Proximity and cost. Establishing a New Zealand trust was significantly cheaper than a Cayman, Jersey, or Liechtenstein structure, and the timezone overlap made administration practical.
The typical structure involved an Australian client settling a New Zealand foreign trust, appointing a New Zealand corporate trustee, and having the trust invest in global assets (often through an underlying company in a no-tax jurisdiction). The trust accumulated income tax-free in New Zealand, and distributions to Australian beneficiaries were managed to optimise the Australian tax position.
What the Trusts Act 2019 Changed
The New Zealand Trusts Act 2019 came into force on 30 January 2021. It replaced the Trustee Act 1956 and introduced several changes that require existing structures to be reviewed and new structures to be designed with these provisions in mind.
Mandatory Beneficiary Disclosure
Section 51 of the Trusts Act 2019 imposes a duty on trustees to hold and make available "basic trust information" to every beneficiary. Basic trust information includes:
- the fact that a person is a beneficiary of the trust;
- the name and contact details of the trustee;
- the terms of the trust deed (or a summary of the trust terms); and
- details of any changes to the trust terms.
A trustee must make this information available to beneficiaries without being asked.
This is a significant change for structures that previously relied on informational asymmetry. However, it is not the end of the story. Section 53 allows a trustee to withhold information where disclosure would be prejudicial to the interests of the beneficiary, the trust, or other beneficiaries. And critically, the disclosure obligation applies to beneficiaries, not to the public. A New Zealand trust with a carefully designed beneficiary class remains a private structure. It is simply no longer a structure where the trustee can refuse to tell a beneficiary that they are a beneficiary.
For properly structured arrangements where the beneficiary class is intentional and the client is comfortable with their beneficiaries knowing about the trust, section 51 changes the process but not the outcome.
Reduced Perpetuity Period
The Trusts Act 2019 imposes a maximum trust duration of 125 years. This is longer than most Australian states (typically 80 years), and for most practical planning horizons it makes no difference. The previous position where some New Zealand trusts were established with no perpetuity limitation is gone, but 125 years covers three to four generations comfortably.
Codified Trustee Duties
The Act codifies mandatory trustee duties that cannot be excluded or modified by the trust deed:
- the duty to know the terms of the trust;
- the duty to act in accordance with the trust terms;
- the duty to act honestly and in good faith;
- the duty to act for the benefit of beneficiaries or to further the permitted purpose; and
- the duty to exercise powers for a proper purpose.
These are duties that already existed at common law. The codification provides certainty and gives beneficiaries clearer grounds for enforcement, but it does not fundamentally change what was expected of a trustee. Well-run trusts with reputable corporate trustees were already meeting these standards.
CRS: What the ATO Sees
Under the Common Reporting Standard, New Zealand financial institutions (including corporate trustees that are "financial institutions" by virtue of holding financial assets on behalf of others) report to the New Zealand Inland Revenue, which then exchanges that information with the ATO. The information exchanged includes:
- the identity of account holders and controlling persons (which includes beneficiaries and settlors of trusts);
- account balances; and
- income credited to the account.
This means the ATO has visibility over the existence, value, and income of New Zealand trust arrangements involving Australian residents. The practical consequence is that New Zealand trusts must be fully disclosed on Australian tax returns and the income must be correctly attributed. This is not a reason to avoid the structure. It is a reason to set it up properly.
Where New Zealand Trusts Still Work
The changes narrowed the use case. They did not eliminate it. A New Zealand trust remains a genuinely effective vehicle in the following circumstances:
1. Trans-Tasman Families
For families with members on both sides of the Tasman, a New Zealand trust provides a single, common law vehicle that both jurisdictions understand. The trust can hold New Zealand and international assets, distribute to beneficiaries in both countries, and be administered by a New Zealand corporate trustee with local knowledge and regulatory oversight. No translation, no civil law complexity, and no need to explain to a New Zealand bank what a Seychelles foundation is.
2. New Zealand Business Operations and Real Property
If the client has genuine business operations in New Zealand or holds New Zealand real property, a New Zealand trust is the natural holding vehicle. It avoids cross-border probate complexity, provides a local structure for property management, and keeps the asset within a jurisdiction whose legal system the client and their advisers already understand.
3. Succession Planning Across Jurisdictions
A New Zealand trust with a 125-year duration provides a long-term succession vehicle in a common law, English-speaking jurisdiction with a well-developed trust law. For Australian clients with international assets who want succession planning that does not depend on civil law jurisdictions, a New Zealand trust is a credible and cost-effective alternative to a Jersey or Cayman trust.
4. Clients Who Have Left Australia
For clients who have genuinely ceased Australian tax residency and relocated to New Zealand or elsewhere, a New Zealand foreign trust offers a compelling combination: zero New Zealand tax on foreign-source income, a familiar common law framework, professional corporate trustee infrastructure, and significantly lower cost than equivalent structures in Cayman or Jersey.
The foreign trust exemption survives. The tax-free accumulation of non-New Zealand source income within a New Zealand foreign trust is not affected by the Trusts Act 2019 changes. What has changed is that the client cannot rely on the New Zealand trustee hiding the trust's existence from beneficiaries or from tax authorities.
5. Charitable and Philanthropic Purposes
New Zealand charitable trusts continue to offer tax exemptions for qualifying charitable purposes and a well-developed regulatory framework. For Australian clients establishing philanthropic structures with a trans-Tasman dimension, New Zealand remains a strong option.
Australian Tax Implications
Australian residents with interests in New Zealand trusts must manage the following provisions:
- Division 6AAA (ITAA 1936): An Australian resident who is an "attributable taxpayer" of a non-resident trust is taxed on the trust's income as it is derived.
- Section 99B (ITAA 1936): Distributions from a non-resident trust can be assessed as ordinary income where the underlying income was not previously attributed to the Australian beneficiary.
- Transferor trust provisions: Australian residents who transfer property or services to a foreign trust may be taxed on the trust's income under the transferor trust rules.
- Foreign trust reporting: The trust must be disclosed on the Australian resident's tax return, including the International Dealings Schedule if applicable.
None of these provisions are unique to New Zealand trusts. They apply to any foreign trust arrangement involving Australian residents. They are manageable with proper planning and ongoing compliance. The cost of compliance should be built into the structuring budget from the outset.
What Should Australians With Existing New Zealand Trusts Do?
If you currently hold assets through a New Zealand trust:
- Review the trust deed against the Trusts Act 2019. The Act applies to all New Zealand trusts, including those established before its commencement. Ensure the deed is consistent with the codified duties and that the trustee has a process for complying with section 51 disclosure obligations.
- Confirm Australian tax compliance. If the trust's income has not been correctly attributed to Australian resident beneficiaries under Division 6AAA, address this now. The ATO's access to CRS data means that undisclosed New Zealand trust arrangements will be identified. Voluntary disclosure with professional advice on penalty mitigation is the prudent course.
- Assess whether the trust still serves its purpose. If the trust was established solely for secrecy, that objective is no longer achievable. If the trust serves a genuine succession, asset holding, or commercial purpose, it is likely still fit for purpose with appropriate updates.
- Consider whether winding up is appropriate. If the trust is dormant or its ongoing costs exceed its utility, winding up may be the right answer. Be aware that winding up a foreign trust may trigger CGT events and section 99B assessable income for Australian resident beneficiaries, so take advice before distributing.
Conclusion
The New Zealand trust is not what it was in 2010. The opacity is gone. The CRS ensures the ATO has visibility. The Trusts Act 2019 requires trustees to engage with their beneficiaries rather than pretend they do not exist.
What remains is a cost-effective, common law trust vehicle in an English-speaking, well-regulated jurisdiction with no capital gains tax, a functioning foreign trust exemption, and a professional trustee market that understands Australian clients. For the right client and the right purpose, that is still a compelling combination.
The question is not whether New Zealand trusts work. It is whether the client's objectives match what a New Zealand trust can deliver. When they do, it is one of the most practical international trust options available to Australian clients.
This material is produced by Cadena International. It is intended to provide general information and opinions on legal topics, current at the time of first publication. The contents do not constitute legal advice and should not be relied upon as such.
