No New Zealand gift duty will be charged on gifts made on or after 1 October 2011.
Gift duty was historically introduced to protect the estate duty tax base (by discouraging the gifting of assets before death). When estate duty was abolished in 1992, gift duty was retained as a means of preventing tax avoidance and to ensure gifts were not made to meet means testing for social assistance. Gift duty has also been seen as a mechanism which buttresses protection to creditors where assets are transferred to a trust. After a review by Inland Revenue it was decided that the policy behind gift duty was not to provide protection in these areas.
With the abolition of gift duty, gifting programmes (often used in the family trusts context) may no longer be required. Instead it will be possible to transfer assets directly to a trust, or in the case of gifting programmes already in place, simply gift off the balance of the remaining debt.
If a gifting programme is stopped however, general trust administration should not be neglected and trusts need to continue to keep up to date records. Continuing a gifting programme may also be recommended where a trust has been established for asset protection purposes and/or where rest home subsidies may become relevant. Circumstances surrounding the point when assets are transferred to a trust are becoming increasingly important, with the Courts being more willing to "look through" a trust to satisfy claims taken by creditors.
Removing the need for the reporting of gifts to Inland Revenue does not remove the need for gifts to be correctly documented. Depending on the type of gift being made, common law or statutory requirements to make a valid gift must still be observed.