Firstly, a bit of background. Family trusts are a way to protect assets, either for your own benefit or for the benefit of your family or others beyond your lifetime. The assets may be cash or other types of assets such as real estate, life insurance, vehicles and securities. Trusts work by transferring the ownership of the assets to trustees. For example, a family that lives in a family home transfers the legal ownership of their asset, the family home, to the trustees. The family can continue to use and enjoy the assets (as long as allowed by the trust deed) even though they no longer personally own the home. A trust may be useful to: • Protect assets against future claims and creditors, such as if a business failed • Put aside money for a special purpose, such as a child's education • Ensure children, and not their partners, receive their intended inheritances • Reduce the risk of unintended claims on an estate in the event of death. While trusts can have benefits, they can also involve a considerable amount of resources in administering them properly. This needs to be weighed against any possible advantages a trust may have. Although a trust is normally given a name and is often referred to as if it is a separate entity, like a company, it is not. A trust is a relationship between trustees and beneficiaries which imposes duties on the trustees to deal with the trust property in the interests of beneficiaries. I'm a Trustee - what are my obligations? The trustees are responsible for managing the trust for the benefit of the people (or organisations) named as the trust’s beneficiaries. In practice, this can often involve some fairly time consuming obligations. Trustees can also be held personally liable - so tread with caution! Specifically, the legal duties of trustees are to: • know the terms of the trust, as recorded in the trust deed, and act according to those terms; • act honestly and in good faith; • act for the benefit of the beneficiaries; • exercise their powers as a trustee for a proper purpose; • keep copies of the trust deed and any variations; • give basic trust information to every beneficiary (including the fact that they are a beneficiary; the names and contact details of the trustees; details of the appointment, retirement or removal of trustees, and their right to trust information.) Unless the trust deed specifically excludes it, legal duties also include: using reasonable skill and care when managing the trust, using any special knowledge or expertise they have eg, as a lawyer, accountant; investing the trust assets prudently; acting unanimously; not using their power as trustee for their own benefit; acting impartially between beneficiaries; and not taking any reward for their duties (it is acceptable to be reimbursed for costs). Additional obligations may be set out in the trust deed. A trustee may be personally liable for debts incurred by the trust, especially if the loss was a result of an intentional breach of trust, dishonesty, or negligence. How can we help? We regularly help to advise clients on whether a trust is right for them. For clients that are trustees, we can help them meet their obligations. Some trusts are relatively simple to administer properly, while others that are more complex require a great deal of time and care from the trustees. A trust with one asset, such as a mortgage-free family home, with all outgoings paid by the family, would generally only need minimal administration. On the other hand, a trust with a range of assets, including income-producing investments, would require a lot of administration. On top of completing an annual tax return, the trustees would need to undertake, for example, periodic reviews of investment strategies and continuous maintenance of the assets themselves. We are experienced in advising on such issues and are always available to assist. Disclaimer: This post is a general discussion and does not constitute specific advice. Any concepts or ideas raised in this post should be discussed with your accountant and/or solicitor to ensure that all relevant matters are considered.

Figuring out how GST affects buying and selling property can be complex, and the consequences of getting it wrong can be costly. ADLS/REINZ issued the latest edition of the Agreement for Sale and Purchase of Real Estate late last year and it contained a number of changes that can affect how GST is treated. Property transactions involve three possible GST rates: No GST Zero rated GST 15% GST Knowing which rate affects your transaction depends upon factors like the GST status of the parties to the sale and whether the land has been, or will be, used for a taxable activity. It is worth involving your solicitor and accountant early to mitigate any potential issues. Before you sign a Sale and Purchase Agreement, always ensure you have a thorough understanding of any GST implications to accurately complete Schedule 1 (GST Information). In residential property transactions where neither the vendor nor the purchaser are GST registered, no GST will apply. However, if you’re in the business of buying, selling, developing or building residential properties you may need to register for GST. This may also include if you have a pattern of buying or selling residential properties. Generally, if both parties are GST registered the sale will be Zero rated. You must register for GST if your annual turnover in the previous 12 months was more than $60,000 (or is likely to be more than $60,000 in the next 12 months). Turnover is the total value of supplies made for all your taxable activities, excluding GST. Your turnover must include the sale of any residential property sold as part of your taxable activities. Short stay accommodation Although most residential property transactions do not involve paying GST, be careful if you think you may use the property for short stay accommodation in the future, such as through AirBnB. This activity will be captured within the GST net if total sales are $60,000 per year or more. This means that if you carry on other taxable activities in the same entity it will be the total of all activities including accommodation sales that is counted. In this scenario, it would be advisable to talk to your accountant and solicitor about potentially purchasing the property via another entity. If your occupancy rate increases at some point in the future, the risk of exceeding the $60,000 threshold again needs to be kept in mind . If you have a property manager, the gross tariff they receive is the amount that triggers GST registration, not the net amount that you receive in your bank account after they deduct their fees and pay expenses on your behalf. If you decide to stop the short stay accommodation and rent the property out on a long term basis instead, you will have to pay back GST on the property. This is usually at market value, although there are some exemptions. If the property has increased in value, this amount owing could come as a shock. There are some commercial structures that can minimise this risk, such as having one entity lease the property to another entity that operates the property. Other taxable activities For other commercial transactions where the land may be used for a taxable activity, it is also important to discuss the GST implications with your accountant. Together you can ensure you have a sound long term plan that takes into account any credible changes in business use or GST registration status. Putting the time and effort in upfront to think about how you are going to structure you affairs is the best way to mitigate any future negative GST impacts. This is also the best way to steer clear of any issues with GST tax avoidance legislation. With any tax planning issues you also need to consider the cost and complexity of any alternative structures and ensure that the benefits outweigh the potential risk. The IRD has a helpful guide on tax and property which you can download here . Disclaimer: This post is a general discussion and does not constitute specific advice. Any concepts or ideas raised in this post should be discussed with your accountant and/or solicitor to ensure that all relevant matters are considered.