Tax Reporting for Trusts

Disclosure rules apply from the 2022 income year - are you aware of what is required of you as a trustee?
- Marcus Diprose

It is now a legal requirement for all trusts to provide the IRD with information regardless of whether the trust has an IRD number or not. These disclosure rules apply from the 2022 income year and beyond. These rules are part of the drive for the IRD to obtain more information about trusts so they under the use of trusts more.

The disclosure rules apply to the trustees of trusts that derive assessable income in a tax year. If the trust does not derive assessable income a declaration should be filed with the IRD. Also, some types of trusts are excluded, e.g. non-active trusts, foreign trusts (which have their own reporting regimes), charitable trusts etc. It will capture everything else though.

The primary item trustees must supply is a statement of profit or loss and a statement of financial position. For most trusts, this will be a set of financial statements that will already be prepared. There are simplified financial reporting requirements if a trust has less than $100,000 in assessable income, less than $100,000 in deductible expenditure and the total assets are valued at less than $5 million at balance date.

Like the reporting regime for foreign trusts, trustees will need to also disclose the following information:
1. The amount and nature of settlements received.
2. Details of all settlors, including details of all previous settlors.
3. The amount and nature of distributions made.
4. Details of beneficiaries who received the distributions. Note, this will include any movements in beneficiary current accounts.
5. Appointor details, i.e. the people who hold the power to appoint and remove trustees or the power to amend the deed of trust.

For individuals who come under the above points, trustees will need to provide the full name, date of birth, the jurisdiction of tax residency and tax identification number.

All of these disclosures are likely to be completed through the MyIR portal. This means the trust will need an IRD number if it has assessable income.

All trustees and their professional advisors will need to be aware of these rules and take them into account when preparing 2022 financial statements and income tax returns.

Many thanks, if you would like to learn more please contact either Marcus (marcus@covisory.com) or Nigel (nigel@covisory.com)