New reporting requirements for domestic trusts.
New Zealand Trusts that are active and meet specific criteria are now required to provide information about income, wealth and assets.
Trusts have always have historically offered a high level of privacy and had leniency with compliance. However, these new reporting requirements for domestic trusts will affect approximately 180,000 New Zealand Trusts that report assessable income each year and may fall within the latest compliance update.
There are exceptions to these requirements for the following trusts:
- Foreign Trusts
- Charitable Trusts
- Trusts that are eligible to be Maori Authorities; widely-held superannuation funds.
- Exempt employee share schemes
- Debt funding special purpose vehicles
- Trusts set up to hold electricity lines companies.
From the IRD’s Operational Statement, the key requirements for Trusts to complete are to;
File an income tax return (form IR6)
Prepare financial statements.
Comply with additional disclosures (as specified in s 59BA of the Tax Administration Act 1994)
A more comprehensive breakdown of the reporting requirements for New Zealand Trusts that meet the criteria will be the following:
- A statement of profit or loss and a statement of financial position.
- The amount and nature of all settlements made to the trust in the income year.
- The name, date of birth, jurisdiction of tax residence, and tax file number/taxpayer identification number of all settlors who have made a settlement on the trust in the income year, or settlors whose details have not previously been supplied to IRD.
- The amount and nature of all distributions made by trustees of the trust in the income year.
- The name, date of birth, jurisdiction of tax residence, and tax file number/taxpayer identification number, of all beneficiaries receiving such a distribution.
- The name, date of birth, jurisdiction of tax residence, and tax file number/taxpayer identification number, of each person having a power of appointment under the trust deed (including the power to appoint or dismiss a trustee, add or remove a beneficiary, or amend the trust deed).
A Trust can fall within two tiers of reporting obligations
- A Simplified Reporting Trust. These Trusts will have less detailed reporting requirements.
A Trust will qualify as a simplified reporting trust is it has:
- An assessable income of less than $100000 in an income year.
- Deductible income of less than $100000 in an income year.
- Total Assets of less than $5 million.
2. Trusts that fall outside of a Simplified Reporting Trust.
Whilst all Trusts are required to prepare financial statements to a minimum standard, the financial statements for trusts that are not simplified reporting trusts must:
- Be prepared applying the principles of accrual accounting.
- Include a statement of accounting policies.
- Disclose comparable figures for the previous income year to the extent that the trustee has that information.
- Include a reconciliation between the profit or loss in the statement of profit or loss to taxable income.
- Include an appropriately detailed schedule of the trust’s fixed assets and depreciable property used for tax purposes and.
- Disclose details of any below market value transactions between a trustee and an associated person.
What will this mean for you as a Trustee?
Additional time will now be required by Trustees when preparing and collating information for the annual accounts and tax returns for a Trust.
Additionally, more information from a Trust will be shared to overseas tax authorities and Government departments. Trust compliance can be time consuming and hard to keep up to date with. If you have any questions, or require assistance in the financial reporting of your Trust, Please get in touch with your Walker Wayland accountant.