New Trust Disclosure Rules

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Trust disclosure rules

Following on from the Trust Act 2019 coming into force earlier this year, Trusts now have additional reporting obligations to the Inland Revenue from the 2021/22 tax year.  The new disclosure rules have been introduced to assist the Inland Revenue in monitoring compliance with the recently introduced top personal tax rate of 39%.  The new rules also provide the Inland Revenue with information on transactions they have not historically had visibility over.

In the past, trusts that have taxable income have had to file income tax returns but haven’t necessarily had to file financial statements.  Inland Revenue records estimate there are 180,000 domestic trusts that have assessable income and maybe impacted by the new disclosure rules.

What Needs to be Disclose:

  • Financial statements including a profit & loss statement and balance sheet
  • Details of all settlements made on the Trust during the year including details of the person or entity making the settlement
  • Details of all distributions made by the Trust during the year and details of the person or entity the distribution has been made to
  • Details of those who have the power to appoint or remove a trustee, beneficiary or make changes to a trust deed
  • Any other information required by the IRD

Generally the information will need to be reported for the first time for the year ended 31 March 2022 as part of a Trusts income tax return however, the Inland Revenue also has the ability to ask for the same information for the previous eight years.

Exemptions

Trusts with no activity other than just owing a family home or holiday house maybe eligible to apply for non-active status which removes the need to make the disclosures. 

What Next

Trustees will need ensure they have records readily available and to consider if the Trust has records for earlier years to enable the information to be provided to Inland Revenue if requested.  Trustees should also consider if the trust should apply for non-active status to remove the reporting requirement.

For further information, feel free to get in touch.

Darren Dentling

Partner, Bendall and Cant

darren@bcca.co.nz

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