Reviewing the New Zealand Property (Relationships) Act: have your say

New ZealandYou might not know it, but New Zealanders have a love affair with trusts. NZ practitioners probably won’t be surprised to hear that there may be anywhere between 300,000 to 500,000 trusts in the country, one of the highest per capita rates in the world.

But trusts can lead to unfair outcomes when a relationship ends. As a general rule, trust property isn’t divided equally between the partners. It’s only divisible to the extent that each partner is a beneficiary of the trust, and has a vested or contingent interest in the trust property. That means the Property (Relationships) Act 1976 (PRA) doesn’t apply to a lot of the property used and enjoyed by New Zealand families.

While the law does offer some remedies, there are issues with those too. Sections 44 and 44C of the PRA are limited, and the proliferation of alternative remedies to attack trusts is making it difficult for practitioners to provide advice. Many people argue that the PRA should deal with trusts more effectively, and on a clearer and more principled basis.

Our preliminary view is that the PRA doesn’t strike the right balance between the preservation of trusts and enabling a just division of property at the end of a relationship. Unfortunately there’s no ‘silver bullet’ solution. So we’ve presented four options for reform in our paper, Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

1. Change the PRA’s definition of ‘property’ to include any interest under a trust through which it is both likely and permissible that the partner will receive a distribution of trust property. This may include a partner’s power of appointment if they can exercise it in their own favour. Option 1 would mean that qualifying discretionary beneficial interests could be treated like any other item of property under the PRA.

2. Change the PRA’s definition of ‘relationship property’ to include the value of trust property attributable to the relationship if the court considers it just. The focus of this option is on the character of the underlying trust assets rather than option 1’s focus on the nature of the partner’s beneficial interest in the trust. It seeks to bring trust property into the relationship property pool when that property has the character of relationship property. The court would, however, retain discretion to prevent sharing of the trust property when the partners have genuinely, and with informed consent, alienated the trust property for the benefit of third party beneficiaries.

3. Broaden section 44C to overcome its main limitations. This would include changes to remove the requirements that the disposition be of relationship property and that it must occur after the relationship began. Section 44C(2) would be expanded so that the court may order the trustees to pay to one partner a sum of money from the trust property or transfer to a partner any property from the trust. The matters the court must take into account in exercising its powers under section 44C(2) could also be expanded. These changes would give section 44C a much wider application.

4. A new provision modelled on section 182 of the Family Proceedings Act 1980. Section 182 has proven to be a useful provision that gives effect to the original expectations of people that settle trusts and deals with injustice that could otherwise be caused by changed circumstances. But it needs to be enlarged to apply to de facto relationships as well as marriages and civil unions, and there’s a case for bringing it into the PRA.

There will be varying degrees of support for, and opposition to, the options above. That’s why it’s so important for you as STEP members to have your say. Please visit our consultation website below and tell us how you think the law should be reformed. Part G of our issues paper is dedicated to what should happen to property held on trusts.

Reviewing the Property (Relationships) Act

Please email your submission to pra@lawcom.govt.nz by 7 February 2018

Helen McQueen, Commissioner, New Zealand Law Commission

HMRC message regarding SA900 forms

Simon HodgesUpdate: 18 January

Further to the post last week alerting members to an issue with SA900 forms, HMRC has issued the following update:

‘In December 2017, we advised of an issue affecting a small number of SA900 forms filed electronically which resulted in some inaccurate calculations where there is a capital gain liability. The problem has now been resolved and calculations should now be correct for returns filed from 16 January 2018.

As previously advised, you should pay the tax that you calculated as being due by the payment deadline of 31 January. If you have already filed, your return will be checked and corrective action taken where necessary.’

Original blog:

STEP has been alerted by a member to an issue affecting the calculation of tax by HMRC of those who have submitted SA900 forms electronically. The issue was first spotted just before Christmas, when it appeared that the HMRC systems had been incorrectly calculating capital gains tax. The member was informed that the records would be amended within three working days.

Having contacted HMRC, STEP has been asked to disseminate the following message from HMRC to our members:

• We are aware of an issue affecting a small number of SA900 forms filed electronically. This is resulting in inaccurate calculations being issued in self-calculation cases where there is a capital gain liability. We are fixing this problem and expect it to be resolved very soon, and will update you when the matter has been resolved.

• If you have opted to self-calculate the liability due on your SA900, we ask you to use your self-calculated amount when you make a payment against your SA account by the due date.

• We are sorry for any inconvenience.

We will keep our members informed of progress.

Simon Hodges is Director of Policy at STEP.