Two weeks after gift duty was axed, accountants and lawyers are overwhelmed with calls from clients wanting to give assets and cash to relatives or family trusts.
Daniel Hunt, a tax lecturer who runs a training and consulting practice, said that millions of dollars in assets and cash had already changed hands.
The law was changed on October 1. Before that, any taxpayer who gave away more than $27,000 had been liable for gift duty ranging from 5 per cent to 25 per cent.
But few people actually paid the tax as schemes were set up to avoid it, such as arrangements under which people would gift $27,000 a year until the whole asset was transferred.
Hunt said the number of people avoiding gift duty was evident in the fact that the Government received a return of only $1 million a year from the scheme, which cost $500,000 to administer.
Revenue Minister Peter Dunne said the changes were common sense. The ending of gift duty cut compliance costs and was the removal of a tax "well past its use-by date". "Gift duty has continued to impose $70 million of compliance costs on New Zealanders each year, while no longer serving its intended purpose."
Part of that $70 million went to accountants and lawyers in fees, which they will no longer get. The law change is expected to mean the industry that has sprung up to provide gift-duty avoidance structures will disappear.
"We are also seeing an increased interest in the use of trust structures as the abolition of gift duty is seen by many as an 'open door' through which people can now move assets into trusts immediately without needing to put in place a gifting programme over many years," Hunt said, but gifting all assets at once might not always be in a client's best interests.
"Issues that need to be considered include the loss of absolute control of the assets, relationship property issues, long-term tax considerations - especially in light of the recent Penny and Hopper tax avoidance case, which suggests New Zealand courts are applying a stricter approach to using trusts to obtain tax advantages, trust structure issues and the tax consequences of the disposition, such as depreciation, being recovered." Hunt said people should seek expert advice.