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Charitable Trust Definition


Section HC 13 of the ITA 2007 provides that a trust is a “charitable trust” in an income year if:

  • all income derived or accumulated by the trust in that, or any earlier, year is held for charitable purposes, and
  • any income derived by the trustee in the income year is exempt income under either section CW 41(1) (Charities: non-business income) or CW 42(1) (Charities: business income) of the ITA

This definition ensures that such trusts are excluded from rules relating to settlors’ liability to income tax. It also ensures that settlors and trustees of such trusts are not associated persons.

S HC 13 is inconsistent with the ordinary meaning of charitable trust. Not all charitable trusts registered under the Charitable Trusts Act 1957 are eligible to derive exempt income under either section CW 41 or CW 42 of the ITA. A trust must be a “tax charity”, as defined in section CW 41(5), to derive exempt income under section CW 41(1) or CW 42(1) of the ITA.

Proposed Amendments in 2024

The amendments proposed will simplify the legislation by repealing the definition of a “charitable trust” in the trust rules and replace references to the term “charitable trust” with “ a trust that is a tax charity”.


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New Zealand Tax Accountant.