HOW THE GREENS’ TRUST TAX WOULD HIT YOUR HOME AND YOUR KIWISAVER
WHAT IS BEING PROPOSED
The Green Party is proposing a 1.5 percent annual tax on the net assets of trusts. Unlike income tax, this is not a tax on what a trust earns, it is a tax on what it holds, levied every single year regardless of whether the trust generates any income at all.
Trusts Are a Tool for Kiwi Families
The Greens frame their trust tax as targeting the wealthy. The reality is very different. New Zealand has between 300,000 and 500,000 trusts, and even that is likely an underestimate, because only trusts that earn income are required to file tax returns. Trusts that hold property with no rental income, such as a family home, do not have to file at all.
Trusts are used by ordinary New Zealanders for entirely routine purposes: protecting the family home, managing relationship property, planning for retirement, and providing for children or dependants. They are a basic part of how Kiwi families organise their finances.
A Tax on Homeownership
Around one in five homes in New Zealand is held in a trust. Two-thirds of New Zealand’s population live in metro areas where the average property price exceeds $1 million.
Together, that means the trust tax quickly becomes a tax on middleclass homeownership.
The trust tax applies to net assets; that is, equity. A mortgage-free homeowner pays the full amount. A first home buyer with typical 20 percent deposit still faces a significant bill, and it only grows as the mortgage is paid down.
The Hit Is Hardest Where Homeownership Is Highest
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the highest rates of homeownership.
These are not enclaves of the super-rich. They are communities of families, retirees, and small-town New Zealanders who would be landed with tax bills of $8,000 to $12,000 a year simply for holding their home in a trust.
The Kiwi Dream Under Threat
Homeownership remains at the heart of the Kiwi dream. 85 percent of New Zealanders say owning a home is central to getting ahead. The biggest barriers to ownership are cost of living and high house prices, yet the Greens’ answer is to make ownership even more expensive.
For the 82 percent of homeowners who say paying off their mortgage quickly is their top priority, the trust tax sends a clear message: the more you pay down, the more you owe the government.
Coming for Your KiwiSaver
Your KiwiSaver is held in a trust. So are most managed funds, superannuation schemes, and life insurance policies. Together, these structures hold hundreds of billions of dollars in ordinary New Zealanders’ retirement savings.
Unlike the wealth tax, which only kicks in above a threshold, the trust tax applies from the first dollar. That means your KiwiSaver balance gets taxed at 1.5 percent every single year, no matter how small it is.
Using the government’s prescribed return assumptions, the table below shows how much of a KiwiSaver member’s annual return the trust tax would consume.
The Greens appear not to have realised any of this. They sourced their revenue figures from a Parliamentary question that identified $469 billion in total trust assets but failed to distinguish between the types of trusts.
According to the Reserve Bank, over $305 billion of that (nearly two-thirds) is held in KiwiSaver funds, retail unit trusts, superannuation schemes, life insurance, and cash management trusts, including $143 billion in KiwiSaver alone.
This is not the wealth of the few, it is the retirement savings of millions of KiwiSaver members, and the Greens have swept it all into the same tax base.
The Greens are coming for your KiwiSaver, and they may not even know it.
CONCLUSION
The trust tax is a tax on the family home, on the KiwiSaver balances of millions of Kiwis, and on communities where homeownership rates are highest. It would punish those who have saved and built equity, strip up to 100 percent of returns from the most cautious retirement savers, and land homeowners with bills of up to $18,000 a year, regardless of whether they have the income to pay. It is a tax on aspiration, and hundreds of thousands of ordinary New Zealand families would pay the price.
The impact is hardest on the most cautious savers. For those in defensive or conservative funds, often older New Zealanders approaching or already in retirement, the trust tax would destroy between 60 and 100 percent of their annual return. Even for those in a balanced fund, the most common KiwiSaver fund type, close to half of every dollar earned would be taken by the trust tax alone.