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Budget Podcast – John Peterson, Vicki Ammundsen and Sybrand van Schalkwyk

John Peterson and Vicki Ammundsen join me on this first TalkTax podcast.  Hope you enjoy our thoughts on the Budget released today.  Please leave a comment below.

Click on this link to listen: Thoughts on the Budget

The transcript of the podcast is copied below:

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Clarification regarding blue pencil

The recent decision in Canterbury Development Corporation & Ors v Charities Commission (see provides a useful consideration of the “blue pencil” provisions in s. 61B of the Charitable Trusts Act 1957.  Essentially s. 61B can be used to delete provisions of a trust that invalidate a charitable purpose.  However,  although the section refers to a “trust”, the High Court has interpreted the legislation broadly and to be read as referring to a charitable entity rather than to be limited to a charitable trust.  Although this decision did not assist the appellant in this case, it provides a useful clarification regarding the scope and limitations of s.61B .

Residential Care Subsidy – Means Assessment and Gifted Assets

Advisors may be under the impression gifting assets to a family trust will provide some degree of protection from a means assessment for the residential care subsidy under the Social Security Act 1964.  However the level of protection is not as significant as you may initially have thought.

It is widely known that the means assessment “adds back” gifts made within 5 years of the date of assessment if the gift is in excess of 5,500 p.a.  It is perhaps less widely known that this claw back also extends to gifts made by the person’s spouse or partner.

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Trust and intention

Intention in the context of trusts is more usually seen in the context of the three certainties. However, the recent decision in Ward v Ward [2009] NZSC 125 regarding an application under s. 182 of the Family Proceedings Act, may require looking at intention in the trust context in a whole new light.

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What happens to the trust when the love is gone–subtitle another way to pay tax

Trusts can provide excellent inter-generational asset protection. However, when relationships break up assets in trust solution (rightly or wrongly – I’ll leave that analysis for another day) are often taken into account. The equal sharing principle of the Property (Relationship) Act 1976 is pretty much standard modus operandi now and accordingly, or despite, many parties fail to appreciate or understand the advantages and limitations imposed when trusts are involved.

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‘In Vicki you can Trust’…

Congratulations to Vicki Ammundsen one of TalkTax’s respected authors. Her new book ‘Taxation of Trusts’, published by CCH, is out now…

Taxation of Trusts


The recent decision of Asher J in Public Trust and Ottow and Ottow (CIV-2009-404-3825) concerns the not uncommon situation where a guarantor no longer wishes to be bound by a guarantee that has been called up. The facts of the case are somewhat pedestrian and involve an advance to a trust that was guaranteed by trustee / beneficiaries. The disappointing element of the judgment is that while considering the question of independent advice, Asher J states that there was no duty to ensure Mrs Ottow had separate legal advice from the Ottow Trust (“the Trust”), the apparent justification for this being that “The advance was effectively a joint advance to Mr and Mrs Ottow.”

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Amended definition of beneficiary income

The definition of beneficiary income in s. HC 6 has been amended with application from the 2009-10 and later income years. The amended definition extends the 6 month period within which a trustee must allocate income to the later of the end of the 6-month period or the period within which the trustee either files or is required to file a return.

The definition was amended to address problems where tax agents were effectively required to prioritise the preparation of trust accounts and tax returns over other accounts and returns so as to meet the 6-month deadline.

However, it is common for deeds of trust to include a clause that provides that any income not allocated or paid within 6 months will be capitalised. Accordingly, care is required to ensure that the terms of the deed of trust provide that income is available to be paid or applied outside the 6 month period.

Can extending the trust period bring the existing trust to an end?

Following on from the post on 23 October 2009 regarding tax consequences that can follow on from a variation of trust it is perhaps timely to consider whether something as commonplace as a variation in trust period could effect a fundamental variation.

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Variation of trusts can have tax consequences

Variations run from changes to deeds of trust for administrative reasons or to reflect legislative amendment; to changes that affect beneficial interests.
The consequences of a variation depend on the extent of variation. A variation of a minor nature such as a change of the trust’s name will not have tax consequences because there is no alteration to the rights or obligations pursuant to the trust.
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Recent comments

  • Peter: When you have more than one job all your income is added up and you pay tax on the total income amount. For...
  • Joanne Martin: Hi Would you be able to email me to discuss a small company that is an LTC which I need some advice on...
  • Rizwana Saheed: You are on the right track that there is an exemption when employees work overtime but whether or not...
  • bryan: as a group of employees we get paid meal money if we exceed 11hrs on any day. Employer says he wants to tax...
  • linda: My mother is 94 and has dementia. With govt assisted carers she is still living in a home gifted within the...
  • Sharon: Hi Daniel, Can you please advise how owners of a profit-making LTC pay themselves? The owners used to pay...
  • Another Anne: My Dad is in care on full subsidy. I am EPOA. Are we able to gift some money to my brother in UK so...
  • Twagilayesu Isaya: I agree with the author of this article that Inland Revenue Department need to provide clear...
  • Quinn: Hi. I would like some clarification regarding the valuation of the investments component of the owners basis...
  • QROPS Pensions: Interesting piece of writing, you always write the most useful content & TalkTax is no exception...

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