Trustee Tax

Trustee income — income a trust earns and retains rather than distributes to beneficiaries — is taxed at a flat 39% rate under the Income Tax Act 2007 s HC 22. This rate was raised from 33% to 39% by Budget 2023, effective for the 2024-25 income year onwards, to match the top personal marginal rate and remove the incentive to shelter income in a trust.

A de minimis carve-out (s HC 40) softens this for small trusts: if a trust's net trustee income for the year is $10,000 or less, the WHOLE amount is taxed at 33% instead of 39% — it's a cliff, not a marginal band, so a single dollar over $10,000 pushes the entire amount to 39%.

Trustees can reduce the overall tax bill by distributing income to beneficiaries instead of retaining it — beneficiary income is taxed at the beneficiary's own marginal rate (10.5%–39%), which is often lower than the flat trustee rate, especially for beneficiaries with modest other income. This trade-off between retaining income (flat 39%/33%) and distributing it (beneficiary's marginal rate) is the core decision trustees face each year.