Janet Xuccoa
May 13, 2022

New Reporting Regime

Now that we are completing Financial Statements and Tax Returns for clients for the 2022 financial year it’s appropriate to remind you of the increased scrutiny Trusts are receiving from the Commissioner of Inland Revenue Department (IRD). We informed you this would occur back in October 2021.

Under the new 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.  This insight includes understanding how the top personal tax rate of 39% works in relation to the Trust income rate of 33%.

New Information Requirements

Other than preparing detailed financial statements, the following information will now need to be provided 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 holds 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 appropriately documenting transactions and collecting and communicating requisite information to IRD will involve additional time spent.  For this reason, an increase in fees is to be expected. Those front footed Trustees who work closely with their Greenlion Accountant and the Trustee Services Division are likely to benefit from time efficiencies and thus incur less cost.  For this reason, we ask Trustees to become involved in the process by providing us with the information we need in a timely manner and ensuring your Financial Statements are backed with appropriate Trust documentation.

Should you wish to discuss your Trust requirements this year, be sure to contact your Greenlion Advisor and the Trustee Services Division by clicking on this link. We’re happy to assist.

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