Trusts - new financial report requirements

The new IRD disclosure requirements for all taxable domestic trusts applied from April 1. Trustees are now required to provide: A summary of financial information from their statement of profit or loss and statement of financial position;

The nature and amount of any settlement made on the trust during the year. Any settlements which are minor and incidental to the trust’s activities need not be disclosed;

The full details of each settlor of the trust: name, IRD number, date of birth, tax residence information, including details of previous settlors;

The amount of any distributions made during the year, and the full details of the beneficiary who received the distribution (the source of the distribution may also be required);

The full details of any person who has powers to appoint or remove trustees and beneficiaries or amend the trust deed;

Other information as specified by the Commissioner e.g. any transfers to the trust by associated persons.

The IRD will use the information to assess trustees’ compliance with the 39 per cent top rate of personal income tax rate enacted in December 2020.

It will also help IRD to monitor the use of structures and entities by trustees.

The new reporting obligations do not apply to trusts that do not derive assessable income in a tax year, such as trusts set up to own the family home.

The following are also excluded from the new rules:

trusts incorporated under the Charitable Trusts Act 1957;

charitable trusts registered under the Charities Act 2005; Ma¯ori authorities; large pension trusts; employee share schemes; trusts that are debt funding special purpose vehicles;

lines trusts established under the Energy Companies Act 1992;

foreign trusts (already subject to the foreign trust disclosure rules).

The minimum standards for financial statements which are subject to the new disclosure rules are set out in the Tax Administration (Financial Statements – Domestic Trusts) Order 2022 published on March11.