Trust Law Update: new set of Obligations as Trustees of Trusts.

The Taxation (Income Tax Rate and Other Amendments) Act 2020 places an additional burden on Trustees to disclose the financial activities of the Trust. This may be partly due to information gathering for the new IRD internal system but also in relation to compliance with the new income tax rate of 39%.

Trustees will be required to submit an Annual Return on behalf of the Trust including:

• all income derived;
• a statement of profit or loss and financial position;
• the amount and nature of each settlement;
• the details of each person making a settlement (the Settlor) including their name, date of birth, tax residency status and tax identification number;
• the amount of each distribution;
• the details of each person receiving a distribution (the Beneficiary) including their name, date of birth, tax residency status and tax identification number;
• the details of the people that hold the Power of Appointment for the Trust and the ability to ‘hire & fire’ trustees, add or remove beneficiaries and vary the Trust Deed, including their name, date of birth, tax residency status and tax identification number.

Under new section 59BAB of the Act, the Commissioner may require a Trustee to provide similar details for the period after the 2013-14 income year through to the 2021-22 income year. This is where the structure of independent trusteeship, annual meetings and professional record keeping can prove invaluable. Trustees will need to consider how they will gather, retain and provide this level of information to the Inland Revenue Department historically and on an annual basis moving forward.

If you believe that your Trust falls into the category of Non-Active, Foreign, Charitable or eligible as a Maori Authority, you may be exempt from these new obligations.

If you feel you could use some specialist advice, don’t hesitate to contact the Trusts & Wealth Protection Team.

Contact us