Trust Disclosure Rules - What you need to know

Previously, it has been sufficient for trusts to file returns declaring taxable income including distributions to beneficiaries that are subject to NZ tax, without filing standard financial statements.

On 1 April 2021 new disclosure rules came into effect for trusts, in an effort by Inland Revenue to get better visibility over whether certain transactions were taxable. These disclosure rules include:

• Details of all settlements on the trust. This includes all transfers of value along with full details identifying those entities or individuals making the settlements. Transfers of value include all things monetary and non-monetary other than the value of minor services provided at less than market value.
• Details of all distributions (whether taxable or not; monetary or non-monetary) including details identifying the recipients.
• Details identifying those who have the power to appoint or dismiss a trustee, add or remove a beneficiary, or to amend the trust deed.
• Any other information required by the Commissioner.

Along with a higher tax rate, these additional disclosure requirements will increase the compliance costs making trusts less appealing for individuals as a means of asset planning and protection.

Please contact your business partner if you would like to discuss these increased costs.