Blind trust: How Michael Wood could have avoided disclosing airport shares

Transport Minister Michael Wood is in hot water after failing to declare his ownership of Auckland Airport shares. He says he thought the shareholding was held by a trust, not requiring disclosure, but it turned out they had for decades been held personally despite repeated requests from the Cabinet Office for him to divest.

What are trusts? A trust is a legal structure set up by a settlor and managed by trustees for the benefit of beneficiaries, according to a purpose specified in its trust deed. They are commonly used to protect assets from creditors or from being considered relationship property, maintaining multi-generational collective assets, and managing conflicts of interests.

How do they protect from conflicts? If assets are not held personally, particularly if held in a blind trust where beneficiaries are not involved in decision-making or even informed about what they specifically own, conflict is considered to have been avoided. In the case of Minister Wood, if his airport shares were held in a trust structure they would likely not have needed to be disclosed.

Do other MPs use trusts to hold Auckland Airport shares? Trusts are private affairs, and we simply don’t know what most of our parliamentarians have stashed away in theirs.

How do trusts help with tax bills? For a long time the tax rate levied on trusts was less than that paid by some individual taxpayers. For instance in 2020, after the top personal tax rate got lifted to 39 per cent, the trust tax rate remained at 33 per cent. These differences encouraged canny accountants and lawyers to structure client affairs maximising trust income to arbitrage this difference in rates.

Is this still the case? No. This differential was removed in last month’s Budget and trust tax rates were increased to match the top personal tax rate of 39 per cent.

How common are trusts? Fairly, but exact numbers are hard to come by. There is no publicly-searchable register of trusts, and property and company ownership records often just record trustee names - not the underlying trust - on official registers. In 2020 the Ministry of Justice estimated there were between 300,000 and 500,000 trusts operating in New Zealand.

And amongst our MPs? The most recent Pecuniary Interest Register published by Parliament shows over half (58 per cent) of MPs use trusts. These range from trusts managing family assets such as farms, Iwi groups managing collective assets, and even charitable trusts where MPs serve as trustees. Every party represented in parliament had MPs who declared links to trusts, with nearly 80 per cent of the National caucus, and 52 per cent of Labour’s, disclosing such an interest.