Inland Revenues Increased Scrutiny Of Your Trust

REPORTING REGIME

Now that we are completing financial statements and tax returns for clients for the 2025 financial it’s appropriate to remind clients of the increased scrutiny Trusts are receiving from the Commissioner of Inland Revenue Department (IRD).

Under the reporting regime established by Operational Statement OS22/02, all Trusts in New Zealand that derive assessable income must file tax returns and satisfy the new disclosure rules.

These rules are applicable from the commencement of the 2021/2022 tax year.
Some exceptions exist. For instance, non-active complying trusts that do not file tax returns are not subject to the new reporting requirements. It is compulsory however for these Trusts to file a declaration to this effect.

The purpose behind the new reporting measures is to gain information in relation to the use and working of trust structures.

NEW INFORMATION REQUIREMENTS

Other than preparing detailed financial statements, the following information will now need to be provide to the IRD:

• The earnings of the Trust;
• The asset, liability and equity position of the Trust;
• Details of any party who is a named or deemed Settlor of the Trust;
• Details of any person who has made a settlement on the Trust;
• The amount and nature of the settlement made on the Trust during the year;
• Details of any Beneficiary who has received a distribution from the Trust during the year;
• An amount and nature of the distribution received during the year;
• A schedule of movements in the Beneficiary’s account; and
• Details of every person who hold the power of appointment in the Trust.

Whilst the new reporting standards are applicable for the 2021/2022 year, the IRD does have the power to request the above information be provided for from 1 April 2014 should it so wish.

The new reporting regime brings to bear increased scrutiny on Trusts, reinforcing the need for Trustees to satisfy their legislative duties. Satisfactorily documenting Annual Trustee Meetings and substantiating those transactions record in financial statements by way of Trustee Resolutions, Loan Agreements, Acknowledgments of Debt and Gifting (where appropriate) will be vital in proving Trustees are compliant with statutory requirements.

WHAT TRUSTEES SHOULD DO NOW

Trustees will undoubtedly appreciate the need for appropriately documenting transactions and collecting and communicating requisite information to IRD. For this reason, front footed Trustees who work closely with their independent trustee and Accountant are likely to benefit from time efficiencies and potentially incur less cost. For this reason, we ask Trustees to become involved in the process. If we are your independent trustee provide us with the information we need in a timely manner and ensure your Financial Statements are backed with appropriate Trust documentation.

Should you wish to discuss your Trust requirements, be sure to contact us. We’re happy to assist.