Your Family Trust and the 2026 Election: What's at Risk?

The trust tax rate has already been raised to 39% — a significant change that took effect in April 2024 and caught many trust holders off guard. But the 2026 election introduces a new layer of uncertainty. Depending on who forms the next government, the rules around family trusts could change again — and in some scenarios, quite substantially.

This post sets out what each major party is signalling on trusts and trust-adjacent tax policy, and what that means if you currently hold assets in a family trust.

Since April 2024, trustee income has been taxed at 39% — the same rate as the top personal income tax rate. The change was designed to prevent high-income earners from using trusts to shelter income at the old 33% trustee rate.

The practical effect: if your trust retains income (rather than distributing it to beneficiaries), that income is taxed at 39 cents in the dollar. Distributions to beneficiaries are still taxed at the beneficiary's marginal rate, which may be lower — but IRD has tightened its scrutiny of distributions that appear designed primarily to reduce tax.

For most family trusts used for asset protection and estate planning, the 39% rate is a cost to manage, not a crisis. But the election could change the calculus further.

National has made a clear pre-election commitment: no new taxes if re-elected. That includes no wealth tax, no CGT, and no further changes to trust taxation beyond what is already in place.

For trust holders, a National-led government is the most stable outcome. The 39% trustee rate stays, but no new layers are added. National has also shown no appetite for the kind of trust disclosure regime that has been floated in some quarters.

Risk level under National: Low. The current rules stay. The main risk is fiscal pressure forcing unannounced changes mid-term — but National's track record suggests this is unlikely to involve trusts specifically.

Labour has not announced a CGT or wealth tax for this election cycle. But the party has consistently used language around tax "fairness" and has not ruled out future reform in the way National has.

The specific trust risk under Labour is twofold:

1. Disclosure and transparency. Labour has previously supported greater transparency around trust ownership and distributions. A Labour government could introduce enhanced disclosure requirements — requiring trusts to file more detailed information with IRD about beneficiaries and distributions. This would not change the tax rate but would increase compliance costs and reduce privacy.

2. Coalition with the Greens. If Labour needs the Greens to form a government, the Greens' wealth tax policy becomes a live negotiating point. The Greens propose a 2.5% annual tax on net wealth above $2 million. Trust-held assets would almost certainly be included in the wealth calculation — the policy is specifically designed to prevent sheltering through structures.

Risk level under Labour alone: Moderate. Disclosure changes are plausible. A CGT or wealth tax in the first term is unlikely but not impossible.

Risk level under Labour + Greens: Higher. A wealth tax becomes a genuine possibility, and trust-held assets would be in scope.

The Greens have a fully costed wealth tax proposal: 2.5% per year on net wealth above $2 million, with trust assets included. The policy is designed to capture wealth held in trusts, investment properties, and business equity — not just liquid assets.

For a trust holding a $1.5 million family home and $800,000 in investment assets, the total trust value ($2.3 million) would attract a wealth tax of $7,500 per year on the $300,000 above the threshold.

The Greens are unlikely to lead a government. But as a coalition partner, they will push for wealth tax as a bottom line. How much of the policy survives negotiation depends on Labour's fiscal position and political will.

Risk level under Greens as coalition partner: Significant. A diluted wealth tax — perhaps at a higher threshold or lower rate — is a realistic outcome of a Labour-Greens government.

ACT is firmly opposed to any new taxes and has no plans to change trust taxation. The party has previously floated ideas around simplifying the trust rules, but nothing concrete has been announced for this election.

Risk level under ACT influence: Very low. ACT would push back hard against any wealth tax or trust reform in coalition negotiations.

The honest answer is: do not restructure your trust based on election speculation. Polls are volatile, coalition outcomes are unpredictable, and even a Labour-Greens government would need to legislate any wealth tax — which takes time and faces legal challenge.

What you should do:

Review your trust's current purpose. If your trust was set up primarily for income splitting at the old 33% rate, that rationale is largely gone. The question now is whether the asset protection and estate planning benefits justify the ongoing compliance costs at 39%.

Check your distribution strategy. If your trust is retaining income at 39% when it could be distributing to beneficiaries at lower marginal rates, that is worth reviewing regardless of the election outcome.

Understand your exposure if a wealth tax passes. If your trust holds significant assets, it is worth knowing what your approximate wealth tax liability would be under the Greens' proposal — not to panic, but to understand the stakes.

Do not wind up your trust hastily. Winding up a trust has its own tax and legal consequences. If you are considering it, get advice first.

The 2026 election introduces genuine uncertainty for trust holders — particularly if Labour forms a government with the Greens. A wealth tax is not certain, but it is no longer a fringe policy. The prudent approach is to understand your current position, review your trust's purpose and distribution strategy, and stay informed as the election campaign develops.

If you have a family trust and want to understand how the different election outcomes could affect your specific situation, get in touch — we are happy to work through the scenarios with you.

Related reading: Trust Tax Rate NZ 2026: What the 39% Rate Means for Your Family Trust | Will NZ Ever Get a Capital Gains Tax? The 2026 Election Update | NZ Election 2026: What Each Party's Tax Policy Means for Business Owners