Got a Trust with Ties to Australia? It Might Be Time for a Quick Check

Trusts are often set up with the best of intentions. To protect the family home. To make sure the kids are looked after. To keep things simple when life gets complicated.

But if anyone involved in your trust now lives in Australia—or if you’re thinking about making payments to someone over there—your trust may no longer be working the way you think it is.

And while everything might seem fine on the surface, there are tax rules across the Tasman that can quietly cause problems if you’re not paying attention.

Here are three reasons to take a fresh look at your trust.

 

1.One of your trustees lives in Australia

If a trustee has moved to Australia—even years ago—it could change how your trust is treated for tax purposes. Under Australian rules, just having one trustee based there can be enough for the trust to be considered an Australian tax resident.

That means your trust might be expected to pay tax in Australia, even if the assets are all here in New Zealand. In some cases, it could also result in being taxed twice—once in each country.

 

2.You’re making (or thinking about making) a payment to someone in Australia

If you’ve got a child, grandchild, or other beneficiary living in Australia, and your trust sends them money, that payment might be taxed on their end—sometimes at a surprisingly high rate.

This often happens when the Australian Tax Office treats your New Zealand trust as a “foreign trust.” Even if the money was earned years ago, or was simply a gift, it could still be caught by their rules.

Before making a distribution across the ditch, it pays to understand what the tax impact could be—and whether there’s a better way to do it (hint:  there probably is).

 

3.The IRD and ATO are now talking to each other

Since 2021, the trustees of New Zealand trusts have had to provide more information in their annual tax returns. This includes details about who’s involved in the trust and where the money is going.

That information is now routinely shared with overseas tax departments—including the Australian Tax Office.

With modern data systems, it’s becoming easier for both IRD and the ATO to spot when a trust has connections across the Tasman. Even small distributions or a trustee living abroad can raise a red flag.

If there’s any part of your trust that touches Australia, it’s better to have a conversation now than to deal with unexpected tax issues later. 

Trustees also need to be aware that failing to declare required information in a trust’s tax return can lead to penalties. Since 2021, Inland Revenue expects full disclosure of settlors, beneficiaries, trustees, and any distributions made. If this information is incomplete or incorrect, the trust could face compliance action—including fines or further scrutiny—especially if funds have crossed borders or involve Australian residents.

 

What you can do

If your trust has an Australian-resident trustee or beneficiary—or even just the potential for someone to move—it's worth stepping back and asking: is the trust still fit for purpose?

As a trustee, it’s your job to understand the implications and act if needed. That doesn’t mean pulling everything apart. But it does mean getting proper advice on where things stand, what risks might exist, and what options you have to deal with them.

In many cases, a simple review is all it takes to get clarity and avoid real problems down the line. The key is not ignoring it. If there’s an Australian link, now’s the time to check what that actually means—and what, if anything, you should do about it.

Get in touch — and let’s get it sorted.