Trustees must provide additional financial and non-financial information to Inland Revenue under a new law enacted in December 2020.
The law affects typical NZ family and trading trusts and applies from the 2021-2022 income year onwards.
Trustees will need to disclose the following information in the trust’s income tax return:
- A statement of profit and loss and a statement of financial position.
- The amount and nature of every settlement made on the trust in the income year and the name, date of birth, country of tax residence and IRD/tax number of every settlor who made a settlement.
- The amount of every distribution by the trust and name, date of birth, country of tax residence and IRD/tax number of every beneficiary who received a distribution.
- The name, date of birth, country of tax residence and IRD/tax number of every person with the power to appoint or remove trustees or beneficiaries of the trust.
IR can request this information from trustees for up to seven years if it is within their knowledge, possession or control. This means they could ask for information about years back to the 2015-2016 income year.
The new rules do not apply to non-active trusts, charitable trusts, Maori Authorities or foreign trusts.
I’m a trustee. What does this mean for me?
The new disclosure rules apply to you if the trust you act for earns or generates income from 1 April 2021 onwards. You will need to keep records of all settlements and distributions from that date.
The disclosure requirements apply from the 2021-22 income year onwards. Trustees should:
- Consider the disclosures they will need to make and how they will collect the required information
- Consider how they would comply with a disclosure request for an earlier income year and whether they need to update the trust’s financial or other records.
Trustees of non- active trusts should consider whether they are exempt from the new rules. If so, they can make a non-active trust declaration. Non-active trusts include trusts that do not derive income or have deductible expenditure. For example, trusts established to hold the family home.
Get in touch with us if you have any questions about how the new rules affect your trust.