Family trust investment in NZ: co-funding secured loans through a trust or company

Family trust investment in NZ can include co-funding secured loans, if the trust deed allows it and the trustees are satisfied it is prudent under the Trusts Act 2019. With HomeSec, the loan agreement and the registered mortgage are in the trustees’ names, and principal and interest are paid straight into the trust’s own bank account.

HomeSec Business Finance, a private business lender lending since 2004, with its New Zealand office in Auckland, funds most of its loans from its own balance sheet and invites wholesale investors to co-fund some of them. Family trusts and investment companies are natural co-funders. Many families invest through a trust or company as well as in their own names, choosing which loans suit which entity.

Why are trustees looking beyond term deposits?

Because cash is earning less than it did. As at late September 2026, the big banks pay about 4.00% to 4.05% on 12-month term deposits, and the highest bank rate is Rabobank’s 4.15%, according to termdepositrates.co.nz. The Official Cash Rate is 2.75%, after falling from 5.50% in mid-2024 to a low of 2.25% in November 2025.

For a trust holding a large cash balance there is a second point. The Depositor Compensation Scheme, in force since 1 July 2025, protects deposits of up to $100,000 per depositor at each institution, trusts included. Above that, the trust is relying on the bank’s balance sheet like anyone else.

Co-funding secured loans offers returns of 12% to 18% p.a. on the loans you choose, with the rate set loan by loan and shown in each pack. It is a different risk from a bank deposit, and each loan’s risks are set out in its pack. Our guide to alternatives to term deposits puts the options side by side.

Can a family trust invest in private mortgages?

Generally, yes. Section 58 of the Trusts Act 2019 is short: “A trustee may invest trust property in any property.” That power is subject to the terms of the trust, so the first step is always the trust deed.

Look for three things in the deed:

• Investment powers. Whether the deed widens, narrows or excludes the statutory power to invest, or restricts lending.
• Decision-making. Acting unanimously is one of the Act’s default duties, so all trustees need to agree unless the deed says otherwise.
• Changes to the duties. The duty to invest prudently is a default duty that a deed can modify, as Chapman Tripp explains.

If the deed allows it, co-funding fits comfortably. Borrowers are unrelated businesses, the loan is fully documented, and every loan is secured by a registered first or second mortgage over New Zealand property. Our explainer on whether a family trust can invest in private mortgages covers the question in more depth.

What does the Trusts Act ask of trustees when they invest?

Two duties do most of the work. Section 29 is the general duty of care: the care and skill that is reasonable in the circumstances. Section 30 sets the standard for investing: the care and skill that “a prudent person of business would exercise in managing the affairs of others”, with a higher bar for professional trustees.

Section 59 then lists matters a trustee may consider when investing. Several map directly onto a co-funded loan:

No investment ticks every box, and none should claim to. What the table gives trustees is a clear record of why a particular loan was chosen.

How does co-funding work for a family trust?

The process is the same as for any co-funder. The difference is whose name goes on the paperwork.

1. The trustees receive a loan pack. HomeSec assesses each loan against its 50-point due diligence checklist and emails the pack.
2. The trustees decide. They review the pack and decide whether the trust will co-fund, and how much, from NZ$100,000. There is no obligation to take any loan.
3. The loan is prepared in the trustees’ names. The loan agreement is in the trustees’ names, acting for the trust. The borrower signs with their own lawyer.
4. The mortgage is registered. The trustees are named on the mortgage registered with LINZ for the trust’s exact contribution, alongside HomeSec.
5. The trust pays at settlement. The contribution is transferred from the trust’s own bank account.
6. Repayments go back to the trust. Principal and interest are paid straight into the trust’s bank account, not to HomeSec.

Section 45 requires trustees to keep core documents, including records of trustee decisions and written contracts. A co-funded loan makes that simple: one pack, one decision, one agreement, one mortgage, one set of repayments.

Can a company co-fund?

Yes. Many families hold investment capital in a company, and co-funding works the same way. The loan agreement is prepared in the company’s name, the company is named on the registered mortgage, and principal and interest are paid into the company’s bank account. The directors decide which loans the company funds, and a board minute recording each decision keeps the file tidy.

Holding companies, investment companies and operating businesses with surplus cash can all take part, provided the company qualifies as a wholesale investor.

How is the interest taxed in a trust or company?

Briefly, and your accountant will confirm the details for your structure:

• No GST. Lending money is a financial service and an exempt supply.
• Interest is taxable income, and resident withholding tax (RWT) applies. Trustees can elect an RWT rate of 17.5%, 30%, 33% or 39%, and companies 28%, 33% or 39%, with 28% the company default, according to IRD. Without an IRD number, the 45% non-declaration rate applies.
• Trustee income. Interest a trust keeps is taxed at the trustee rate of 39% from 1 April 2024. Under the de minimis rule, a trust with net income of $10,000 or less in a tax year pays 33%.
• Beneficiary income. Interest distributed to beneficiaries is generally taxed as beneficiary income at their own rates.

Whether the trust keeps or distributes its interest is a decision for the trustees and their accountant, and co-funding works the same either way.

How does a trust or company qualify as a wholesale investor?

Co-funding is open to wholesale investors under the Financial Markets Conduct Act 2013. An entity can qualify in its own right. The usual routes are:

• Eligible investor. The trust or company certifies its experience acquiring or disposing of financial products, and a financial adviser, qualified statutory accountant or lawyer confirms it in writing.
• Large. Net assets or consolidated turnover of more than $5 million at the end of each of its last two financial years, counting entities it controls.
• Investment activity. For example, a portfolio of specified financial products worth $1 million or more at any time in the last two years.

Our guide for wholesale investors explains each route and the paperwork involved.

Can the trust get its money back when it needs to?

Yes. Loans typically run for 1 to 12 months. When a loan matures and is repaid, the trust’s principal and interest go straight back to its bank account. Trustees can stagger maturities so money comes back around known needs, such as a distribution, a property settlement or a beneficiary’s education costs.

If the trust needs money back sooner, HomeSec will buy out its share of a loan and repay its principal on request. And the trust can stop co-funding at any time. There are no redemption queues and no gating, because there is no pool to freeze. Read more in getting your money back.

Why do trustees prefer direct loans over pooled funds?

Control, and a clean paper trail. In a pooled mortgage fund, the trust owns units and the manager decides where the money goes. When a trust co-funds with HomeSec, the trustees choose each loan, see the property and the borrower, and are named on the security.

New Zealand trustees have seen what happens when that control is missing. When the Du Val group went into statutory management in 2024, investors in its Mortgage Fund and Opportunity Fund were described as unlikely to benefit from any recovery. Our summary of what happened at Du Val sets out the lessons.

Is co-funding right for every trust?

No, and it is better to know that early. It tends to suit trusts and companies with enough capital to put NZ$100,000 or more into a loan while still holding cash and other assets alongside it, and trustees or directors who are comfortable reading a pack and making a decision together.

It is less suited to a trust that needs all its money at call, or whose trustees would rather hand every decision to a manager. Each loan runs for its term, and each decision is yours. If you would like to see the process from the start, read how co-funding works.

Want to see a loan through your trustees’ eyes?

A loan pack is the easiest way to judge whether co-funding suits your trust or company. Register your interest and our Funding Manager will be in touch.