As part of the increase in the top individual tax rate to 39%, the government has brought in the requirement to provide Inland Revenue more information in your trust tax returns. This applies from the 2022 tax year onwards.
They have done this to ensure that Inland Revenue will have plenty of information in order to decide whether or not to investigate situations where they believe there may be re-structuring of assets into trusts purely for tax advantages (i.e. tax avoidance).
This will mean that the costs of preparing trust tax returns and financial information are likely to increase for any trusts that don’t already produce a full set of financial statements including a profit and loss report and a balance sheet.
The following extra information will be required:
• Statement of profit and loss
• Statement of financial position
• Amount and nature of each settlement (a settlement is where someone provides something of value to the trust without any consideration or payment)
• Details of each settlor (the person making the above settlement plus the named settlors)
• For each distribution from a trust, the amount of the distribution and the details of the recipient beneficiary
• Details of each person with powers to amend the trust/appoint trustees/add beneficiaries
• Other information required by the Commissioner
There are various exemptions from this. However, most of these exemptions will not be relevant for a standard family/business/holding trust being utilised for asset protection by many New Zealanders. The main exemption that could apply is where your trust is “non-active”. If your trust is not deriving any taxable income, then it can elect to be “non-active” with IRD and therefore not required to file tax returns. If your trust is currently filing tax returns but you think it could fit the description of non-active, now is a good time to investigate this with your Client Services Manager (or contact GRA if you’re not already a client).
The actual forms and returns don’t yet exist, so to some extent we are still yet to see exactly how detailed the information required will be. However, if you are a trustee of a NZ trust then watch this space and start ensuring that you’re keeping good records for your trust – which you probably should be doing as a trustee anyway.
It is my pleasure to write a testimonial with regards to the nomination of the professional trustee team at Gilligan Rowe and Associates, as a finalist for New Zealand Corporate Trustee of the year. They have acted as a professional trustee for my trust for many year now. I have been thoroughly impressed by their level of knowledge, professionalism, honesty and integrity in all my dealings with them. In addition, through their regular client seminars that I have attended, I have been very impress by the thoughtful critiques of cases and changes in the direction of trust law, and their possible impact on me. I can recommend them without hesitation. Sincerely - BV
Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.
We help new, small and medium property investors become long-term successful investors through our education programmes and property portfolio planning advice. With our deep knowledge and experience, we have assisted hundreds of clients build wealth through property investment.
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