NZ TRUST TAX ISSUES WHEN MOVING TO AUSTRALIA

Apr 7, 2026

NZ Trust tax issues when moving to Australia. Is that “a thing”? Ooooh yes. Let’s explore:

New Zealand trusts are often treated as simple, stable structures. That sense of stability can quickly unravel when trustees or beneficiaries move offshore—particularly to Australia.

Every year, thousands of New Zealanders relocate across the Tasman for lifestyle, family, or work reasons. What is often overlooked is that trust law and trust tax regimes do not move as freely as people do. A decision to board a plane can create unintended tax exposure, not only for the individual trustees, but for the trust itself and for its beneficiaries.

This article explains the key tax traps that arise when a trustee of a New Zealand trust relocates to Australia, and when capital distributions are made to Australian‑resident beneficiaries. While the focus is Australia, many of the lessons apply equally to other jurisdictions.

Before we go any further, we will state that this is high-level general guidance and circumstances differ. So be sure to get specific advice on your situation from professionals who know what they are talking about.

NZ Trust tax issues when moving to Australia.

Why Trustee Migration Is Such a High‑Risk Event

From a New Zealand perspective, trusts are taxed primarily under a settlor‑based regime. If the settlor is New Zealand resident when they settle the trust and the trust continues to meet its obligations, it is typically treated as a complying trust.

Australia, by contrast, taxes trusts under a trustee residency and central management and control regime. This mismatch is the root cause of many problems.

In practice, this means:

A trust can remain fully compliant and benign under New Zealand law
Yet simultaneously become exposed to Australian taxation—sometimes on its worldwide income and capital gains

The risk is often triggered by a single event:
a trustee becoming Australian tax resident.

The Common Scenario: Trustees Moving Across the Tasman

It is increasingly common for family trust trustees to relocate to Australia while:

Remaining New Zealand citizens
Retaining New Zealand assets
Assuming their trust status “does not really change”

Often, trustees do not seek tax advice until:

They are days away from departure
Or after they have already become Australian tax resident

By that point, options may be limited or significantly more expensive.

How New Zealand Views the Trust After the Trustee Leaves

From the New Zealand side, the analysis is generally straightforward.

If:

The trust was settled by New Zealand resident settlors, and
It continues to meet its New Zealand filing and tax obligations

Then:

The trust remains a complying trust
It does not become a foreign trust merely because settlers or trustees relocate

Key consequences in New Zealand

For a complying trust:

Trustee income is taxed at 39%
Beneficiary income can still be allocated and taxed at beneficiaries’ marginal rates
Capital distributions remain tax‑free in New Zealand

Importantly, moving offshore does not, by itself, disturb complying trust status.

This gives many trustees a false sense of security—and that’s where the Australian issues begin.

Australia’s Very Different Starting Point

Australian tax law asks two fundamental questions about a trust:

Is there an Australian‑resident trustee at any time during the income year?
Is the central management and control of the trust exercised in Australia?

If the answer to either question is “yes”, the trust risks being treated as Australian tax resident.

Unlike companies, trusts are particularly vulnerable:

It only takes one Australian‑resident trustee
Even if other trustees remain in New Zealand
Even if there is an independent professional trustee in New Zealand

The “One Trustee Is Enough” Problem

A critical and commonly misunderstood point is this:

The mere presence of one Australian‑resident trustee can be enough to make the entire trust Australian tax resident.

It does not matter that:

The trust owns only New Zealand property
Most trustees are New Zealand resident
The trustee stepping away is “only one of several”

Once Australian tax residency is triggered:

The trust can be taxed in Australia on its worldwide income
New Zealand property can be dragged into the Australian CGT net

This creates immediate and long‑term exposure.

Capital Gains Tax: The Sleeper Issue

One of the most serious risks is Australian capital gains tax (CGT).

When a trust becomes Australian tax resident:

It is deemed to acquire certain non‑Australian assets at market value
From that point forward, future gains may be subject to Australian CGT

For trusts holding appreciating New Zealand property, this can be catastrophic.

For example:

A trust owns NZ property worth $6 million at the time residency is triggered
Ten years later the trust sells for $9 million
Australia may attempt to tax the $3 million gain, even though New Zealand does not

This is entirely inconsistent with New Zealand’s treatment—but Australia does not defer to New Zealand’s policy choices.

Trust Income Tax Rates: A Harsh Comparison

Another sting in the tail is the Australian trust tax rate.

Where income is taxed at the trustee level in Australia:

The effective rate can be up to 47% (including Medicare levy)

This compares unfavourably to:

New Zealand’s trustee rate of 39%

In addition, Australian resident trusts generally:

Must lodge Australian trust returns annually
Incur Australian compliance, advisory, and audit costs

All of this arises simply because a trustee relocated without restructuring.

How to Keep a New Zealand Trust Out of the Australian Tax Net

The solution is conceptually simple but must be implemented properly.

Option 1: Trustees Resign Before Leaving New Zealand

Before becoming Australian tax resident:

Individual trustees should resign
Replacement trustees must be solely New Zealand resident

However, this option requires care:

Control and decision‑making must remain genuinely in New Zealand
Paper changes alone are not enough

Option 2: Use a New Zealand Corporate Trustee

A more robust and commonly recommended strategy is:

Appoint a New Zealand‑incorporated corporate trustee
With proper governance and New Zealand‑based control

A New Zealand company:

Is deemed New Zealand tax resident if incorporated in NZ
Will not become Australian resident merely because shareholders or some directors live overseas

To work effectively:

The majority of directors should be New Zealand resident
Board meetings and control must occur in New Zealand

This creates a much stronger “ring‑fence” around the trust.

The Protector Trap: A Hidden Risk

Many families assume that trustees can simply resign and retain influence by becoming a:

Protector
Appointor
Guardian

This is dangerous territory.

Australian tax law defines “trustee” very broadly. If a person:

Exercises real control over trust income or decisions
Can veto or direct trustee actions

They may be treated as a de facto trustee for tax purposes.

If those powers are exercised while the person is Australian resident:

The trust may still be treated as Australian resident
Central management and control may still be in Australia

Titles matter far less than what actually happens in practice.

Temporary Resident Status: Relief for Individuals, Not the Trust

New Zealand citizens moving to Australia typically receive a Special Category Visa (subclass 444) automatically.

This visa gives access to Australia’s temporary resident tax concession, which is extremely valuable.

If a person qualifies as a temporary resident:

They are generally exempt from Australian tax on foreign‑sourced passive income
Including trust distributions from a New Zealand trust

This can protect:

Beneficiary income
Capital distributions

But there are important limitations.

Temporary Resident Status Is Fragile

An individual will lose temporary resident status if:

They marry or enter a de facto relationship with an Australian citizen or permanent resident
They apply for permanent residency
Their circumstances otherwise breach the criteria

Once temporary resident status is lost:

Trust distributions may become fully taxable in Australia
Past planning assumptions can unravel very quickly

Temporary residence should never be treated as a permanent solution.

When Capital Distributions Are Made to Australian‑Resident Beneficiaries

Even if a trust is carefully structured to remain solely New Zealand tax resident, problems arise when capital is distributed to Australian‑resident beneficiaries.

From a New Zealand perspective:

Capital distributions from a complying trust remain tax‑free

From an Australian perspective:

A very different analysis applies

Section 99B: Australia’s Anti‑Avoidance Rule for Trust Distributions

The key provision is section 99B of the Australian Income Tax Assessment Act 1936.

In essence, section 99B allows Australia to tax:

Amounts received by an Australian‑resident beneficiary
From a non‑resident trust
Even if those amounts would be capital or tax‑free under foreign law

This provision has been the subject of increasing scrutiny by the Australian Tax Office.

In 2024, the ATO released:

Draft determinations
Draft compliance guidance

Signalling that enforcement is increasing.

Common Section 99B Trigger Events

Section 99B can apply in many common scenarios, including:

Distributions of accumulated trust profits
Capital distributions sourced from retained earnings
Gifts made by the trust to resident beneficiaries
Loans made to beneficiaries that are later forgiven

Critically:

Calling something a “capital distribution” does not protect it
Lending instead of distributing often makes things worse

Australian tax law looks at economic substance, not labels.

Why “It’s Already Been Taxed in NZ” Is Not a Defence

A particularly frustrating feature of section 99B is that:

Amounts can be taxed in Australia even if fully taxed in New Zealand at 33% or 39%

There is no automatic credit or exemption simply because New Zealand tax has been paid.

This often comes as a shock to families who have done “everything right” under New Zealand rules.

What About Beneficiaries in Other Countries?

If you are moving overseas, then of course it is not about NZ Trust tax issues when moving to Australia! Australia is not alone in taxing foreign trust distributions aggressively.

United Kingdom

Beneficiary income is generally taxable
Capital distributions may be taxable, particularly for UK‑domiciled individuals
CGT can apply on worldwide gains

United States

NZ trusts are typically treated as foreign non‑grantor trusts
Distributions are subject to complex US rules
Capital gains can flow through as taxable income

In all cases:

Local advice is essential i.e. talk to a UK or USA accountant
New Zealand rules alone are never enough

Practical Planning Checklist

Before a trustee relocates to Australia, consider the following:

✅ Review trustee composition before departure
✅ Consider appointing a New Zealand corporate trustee
✅ Remove decision‑making power from relocating individuals
✅ Review protector and appointor clauses carefully
✅ Document where control and management actually occurs
✅ Map future beneficiary residence scenarios
✅ Get Australian advice early—preferably before tickets are booked

Final Thoughts: Trusts Don’t Travel Well

New Zealand trusts are excellent vehicles—but only when used with an understanding of how other countries view them.

The biggest dangers arise when:

Move decisions are made emotionally or urgently
Trustees assume the trust is “still a New Zealand trust”
Tax advice is sought too late

Once Australian tax residency is triggered, the genie is extremely difficult to put back in the bottle.

With careful planning, most of the NZ Trust tax issues when moving to Australia are entirely avoidable. Without it, the cost can run into hundreds of thousands—or even millions—of dollars. Need help? Talk to your lawyer. Talk to us.

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Phone: 0800-890-132
Email: support@epsomtax.com
Fax: +64 28-255-08279