Trustees qualifying as cash basis person

Amendment to Income Tax Act enables trustees to return income tax relating to financial arrangements on a cash accounting basis. Applies from 2009-10 income years.

Section HC 24 of the Income Tax Act 2007

Section HC 24(2)(b) has been removed to ensure the legislation better reflects the policy objective that trustees should be able to return income tax in relation to financial arrangements on a cash accounting basis, subject to meeting certain thresholds.

Before changes were made in 2009, only a natural person or a trustee of a deceased estate meeting the criteria under section EW 60 could return income tax in relation to financial arrangements on a cash accounting basis.

The Taxation (Business Tax Measures) Act 2009 changed the financial arrangements rules to allow non-individuals, subject to certain thresholds, to be able to qualify as a "cash basis person".

However, the requirement in section HC 24(2), that in determining a trustee's income tax liability, the trustee is not entitled to be a "cash basis person" unless section EW 60 applies, was not removed as part of these amendments (section EW 60 specifies when a trustee of a deceased's estate is treated as a "cash basis person" for the purposes of the financial arrangements rules).

Application date

The amendment applies for the 2009-10 income year and later income years, to align with the application date for the amendments contained in the Taxation (Business Tax Measures) Act 2009.