You may have seen comments in the media recently around the renewed focus of the IRD on Trusts at present, which in part is due to the difference between the tax rate for a Trust (currently a flat rate of 33%) and the new top personal tax rate of 39% on income over $180,000 per annum. The IRD have concerns about how Trusts are being used after this change, and are gathering information to decide whether or not they also need to increase the Trust tax rate to 39%.
As part of this, the Government are requiring additional information to be included when filing Trust income tax returns for the 2022 year (and onwards). All Trusts that have taxable income or are otherwise “in business” are required to comply with these new disclosure requirements. Currently, Trusts that only hold personal property (such as the family home or bach) are not required to make these disclosures, however the IRD have signaled this may change in future.
We will, therefore, be reviewing all Trusts we engage with to determine if you need to comply with the new rules. If your Trust is required to make these disclosures, then our team will need to obtain the following information in addition to the normal annual accounts process.
- The details (full name, date of birth and IRD number) of any person who is a “Settlor” of the Trust. A Settlor is defined as any person who has transferred value to a Trust at any point in time, which could include gifting assets or advancing funds to the Trust, or paying a mortgage on behalf of the Trust.
- The nature and amount of any settlement made on the Trust during the 2022 year.
- The details of any person who received a distribution from the Trust during the 2022 year and information about the amount and nature of the distribution they received.
- The details of any person who has the power to appoint or dismiss a Trustee, add or remove a beneficiary, or amend the Trust deed.
- Additional disclosures with regards to movements in the financial statements for the period.
If you think this might apply to your Trust, we encourage you to start gathering this information now. We may already have some of this information but if not then we will inform you of what is required. If you do not have this information available, we can request this directly from your lawyer.
As you can imagine, for large or long-standing Trusts, there may be a considerable amount of information to gather and disclose this year, which will undoubtedly have an impact on the cost involved in this process. We apologise for the additional compliance costs being imposed on our clients as a result of this legislation, however we have no option but to comply with the IRD requirements.
If you have any questions about these changes, or the information we may require from you, please contact us.
Director’s Opinion by Jon Jarman.
