Additional Reporting Requirements for NZ Domestic Trusts

From the 1 April 2022 trusts are required to provide more information on their annual returns for 2022 tax year onwards.   These changes apply to all NZ domestic trusts that derives assessable income more than $200 in a year.   If your trust is non-active, for instance the trusts assets are either non income-producing e.g. a family home or bach that is not rented out, or produce less than $200 income annually the changes will not apply.

Start Preparing Now

Trustees will need to provide additional information about a trusts earnings, financial position, settlements, settlors, distributions, beneficiaries and powers of appointment.  The increased reporting requirements that must be provided with the Trusts Tax Return for the 2022 tax year are significant, Furthermore, the IRD can require trustees to provide this information for each tax year back to 1 April 2014.    The compliance costs for some Trusts may increase substantially, particularly if the IRD requires information for the last 8 tax years.  Now is the time to get in touch with your lawyer to make sure that your paperwork is in order and up to date.

Is the Trust still fit for purpose?

The combination of these new reporting requirements and the new obligations of disclosure to beneficiaries under the Trusts Act 2019 means that operating a trust will require more administration than before.  All Trustees have a responsibility to safe guard and administer the Trusts assets properly.  Our experience is many ‘mum and dad’ Trustees simply don’t receive the guidance and support to ensure they are doing that.

Benefits of a Trust Review

  • Independent assessment of your Trust setup, including recommendations as to whether it’s still needed
  • Increased understanding of your Trust
  • Peace of mind that your Trust is compliant with the Trusts Act 2019 and will deliver your desired outcomes
  • Clarity as to whether you should accelerate your gifting programme
  • Keeps the structure of your Trust as simple as possible
  • Identifies any tax saving opportunities and reduces any potential exposure to Capital Gains Tax
  • Gives certainty that all assets are protected in accordance with statutory requirements
  • Highlights any potential areas of risk or concern
  • Addresses any financial implications of your arrangements
  • Ensures your Trust meets your succession planning and asset protection objectives
  • Ensures optimal tax structuring and asset protection from the outset if your Trust enters into a major transaction
  • Avoids the Trust being deemed a sham
  • We will work with you and your lawyer to update your Trust if required

 

Need more help?

The better you understand your Trust and how the changes impact you, the easier your trust can be administered and the more peace of mind you will have.   We have developed comprehensive resources to enable trustees to fully understand and exercise their responsibilities.  Need more help?  Contact us for a call, zoom or meet on 06 871 0793.