Summer chart series: Why NZ$10 billion of income is now sheltered in trusts

Bernard Hickey picks out 10 charts from 2009 in a series of videos to play over the Summer break. In this video he looks at the increased sheltering of income in family trusts after the introduction of the 39% income tax rate in 2000. This chart was prepared for the Tax Working Group by the Inland Revenue Department and shows how the use of family trusts boomed after the introduction of the top tax rate and how income declared by trustees, rather than beneficiaries, quintupled to NZ$10 billion by 2008. The chart suggests much income is being sheltered in family trusts, where the tax rate is 33%, to avoid the higher income tax rate. The sharp growth in trustee income, rather than beneficiary income, suggests that income is also being reinvested in capital, where there is no capital gains tax.