Just when you thought sharing information with the IRD couldn’t get any more complex – enter the new Domestic Trust Disclosure Requirements 2022.
Off the back of the new Trusts Act 2019 and the top personal tax rate increasing to 39%, the IRD has decided that it wants a lot more information about what is going on in trusts in New Zealand.
What this means is: if you have a trust that earns income, there is now a requirement to prepare full financial statements and also provide details of all parties involved with the trust to the IRD including all settlors, trustees, beneficiaries and appointors.
You may think living in the family home owned by your trust is tickety-boo, but now the IRD want to know about this, too. Disclosures of all settlements and distributions made via the trust must be detailed, including situations where property owned by a trust is used as the home of a beneficiary.
The extent of the information required to be provided to the IRD includes full names and addresses, dates of birth and IRD numbers of all settlors, trustees and beneficiaries connected to the trust.
While the requirement to prepare financial statements exists, there is no requirement to file these with the IRD each year – but remember the IRD has the power to request these at any time, so they have to be in good order.
Reporting for trusts is now a lot more extensive. with the new information disclosed in the trust tax return. This includes information in the form of an income statement and statement of financial position.
So when it comes to preparing the necessary reporting for your trusts from this financial year, we’re going to be requesting more extensive information. We don’t want to be intrusive – the information we’ll ask for is purely to satisfy the IRD’s new disclosure rules.
As with any new set of rules, there are some exclusions. If your trust does not earn income over $200, then disclosure is not required. However, there is still a requirement to prepare financial statements.
Some of the terminology and definitions set out by the IRD as to what constitutes a distribution and a settlement could have unintended consequences for those connected with the trust. One major example of this is when a beneficiary advances money to the trust interest-free – this could result in that beneficiary being deemed a settlor. Being deemed a settlor could then cause issues in regard to the treatment of student loans and family tax credits.
We recommend that you sit down with your Oxford Edge advisor sooner rather than later to discuss the impact of the new legislation on you and your trust.
