The trustees are together treated for tax purposes as if they were a single person (distinct from the individuals who are the trustees of the trust from time to time).

An Interest in possession (IIP) is characterised by a Beneficiary's right to the income of a trust as it arises. The income belongs to the beneficiary and the trustees have no Authority to withhold it, except to use it for legitimate expenses.

If trust income does not fall within the definition of accumulated or discretionary income in section 480 of the Income Tax Act 2007 (ITA 2007) then it is considered the income of ‘other persons’ and is to be taxed at basic and dividend rates.

Ultimately the income is charged on the beneficiary at their personal rates, regardless of when and whether the income is paid over to them. However, the trustees are liable to income tax on the income arising from trust property because they are the legal owners of the trust property and therefore the persons receiving the income.

The distinction between