FIF for family trusts: no $50,000 exemption, but a CV choice

It is a common idea that putting foreign shares into a family trust keeps them under the $50,000 FIF threshold. On our reading of Inland Revenue's guide, it does the opposite: an ordinary family trust has no $50,000 exemption at all. What it does keep is the individual's right to choose comparative value (CV) instead of the fair dividend rate (FDR) each year. This guide sets out the two kinds of eligible trust, what each gets, and how FIF income then flows through trustee and beneficiary tax.

Type A and type B trusts

The FIF rules use two labels for trusts, and they do different jobs.

The $50,000 exemption is given to natural persons and trustees of type A trusts (IR461 p9). Because an ordinary family trust does not appear on the type A list, our reading is that it has no exemption. We have not read every word of the definition section in the Act (s CQ 5(5)), so treat this as our reading and confirm it with your accountant; it is consistent with Inland Revenue's own list on IR461 p24.

What this means for a family trust

• Foreign shares are in the FIF rules from the first dollar. There is no cost test to pass. A trust holding $20,000 of US shares returns FIF income on them.
• Dividends are not taxed separately under FDR or CV; they are covered by the 5% or included in the CV gain (IR3G p21).
• The CV choice each year. Like an individual, the trustees can use CV in a year when it is lower than FDR, and switch freely between years but not within a year (IR461 p16). All the trust's ordinary FIF interests must use the same method that year (IR461 p14).
• No losses. A negative CV total is reduced to zero (ITA s EX 51(7) and (8); IR461 p19). The trust cannot claim a FIF loss against other income.
• Migrant settlors. A family trust whose principal settlor qualifies for the revenue account method may be able to use it (IR461 p17); see the RAM guide.

NZ PIE funds and qualifying ASX-listed Australian companies are not FIF interests for a trust either, as for anyone else (IR461 p7).

Worked example: a trust under $50,000

A family trust bought US shares for $30,000. They were worth $40,000 at 1 April. An individual with the same holding would be under the threshold and taxed only on dividends. The trust, on our reading, is in the FIF rules.

In the good year, if the $2,000 is kept in the trust as trustee income and the trust's total trustee income for the year is $10,000 or less, it is taxed at 33%: $660.00. In the poor year there is no FIF income at all. Our calculator has a "family trust" option that applies the no-exemption reading and the CV choice.

Trustee income or beneficiary income

Once the trust has FIF income, the usual trust rules decide who pays tax on it and at what rate. From Inland Revenue's pages (both last updated 20 April 2026):

The minor beneficiary rule has exceptions listed by Inland Revenue: a beneficiary getting a disability allowance or child disability allowance, a trust that exists to handle a deceased person's estate, income from a Māori authority, and a disabled beneficiary trust. For example, a $1,200 distribution of FIF income to a 12 year old beneficiary, with no exception applying, would be taxed at 39%: $468.00. See FIF for children.

Note that FIF income is not cash. A trust can have FIF income under FDR in a year when it received only small dividends, and a distribution of "income" may need cash the trust does not hold. How trustees deal with that is a trust law and accounting question, not one we can answer.

The "put it in a trust" idea

We have seen the suggestion that a family trust is a way to stay under $50,000, perhaps by splitting a portfolio between a person and their trust. On our reading it does not work that way: the trust's shares have no threshold to stay under. The person's own holdings still have their own $50,000. Each holder is tested on its own: you against your own $50,000 for shares in your name, and the trust, with no threshold, for shares the trustees hold. Splitting a portfolio between the two can therefore bring more shares into the FIF rules, not fewer. It also means two sets of FIF calculations, two sets of records and two returns. Setting up or using a trust has legal and tax consequences well beyond FIF; get advice from a lawyer and an accountant before you act.

Estates: the type A case

Where someone dies holding foreign shares, the trust administering the estate is a type A trust for 5 years after the death (IR461 p24). It gets the $50,000 exemption, measured on cost on any day of the year, the same way as for an individual (IR461 p9). Because it is not type B, on our reading it uses FDR, not CV, once it is over the threshold, unless it also meets the type B definition. After the 5 years it is no longer type A. Executors should check the position each year with their accountant.

Filing and records

Trustees file the trust's own return, the IR6, and Inland Revenue publishes a 2026 Estate or trust return guide (IR6G). FIF income is worked out at trust level with the same FDR and CV formulas, the same exchange rate rules (IR461 p13), and the same per-company limit on foreign tax credits (IR461 p20). Keep contract notes, 1 April and 31 March values, dividend and withholding records, and the minutes or resolutions that allocate income to beneficiaries.

This guide is general information, not tax advice; trusts are one of the areas where we strongly suggest you check with your accountant. Rules checked 12 November 2026.

Questions

Does a family trust get the $50,000 FIF exemption?

On our reading, no. The exemption is for individuals and type A trusts, and an ordinary family trust is not type A (IR461 pp9 and 24). Confirm with your accountant.

Can a family trust use comparative value?

Yes. An ordinary family trust is usually a type B eligible trust, which may choose CV instead of FDR in any year, with the same no-loss floor as an individual.

What tax rate does a trust pay on FIF income?

If kept in the trust, 33% where the trust earns $10,000 or less in the year and 39% above that, from 1 April 2024. If distributed, usually the beneficiary's rate, except under the minor beneficiary rule.

Is an estate treated differently?

Yes. An estate is a type A trust for 5 years after the death, so it has the $50,000 exemption in that period.

Do NZ PIE funds held by a trust count?

No. A PIE fund is not a foreign company, so its units are not a FIF interest for the trust. The fund deals with FIF itself and the trust is taxed under the PIE rules.