The Trusts Act 2019 was enacted at the end of January 2021, and requires greater disclosures and increased transparency regarding trusts records; in essence, Trustees are held accountable to Beneficiaries similarly as Directors are accountable to their Shareholders.

With effect the year ending 31 March 2022, Inland Revenue are now requiring additional information to be disclosed as part of a Trust’s annual income tax return (IR6).

Why has Inland Revenue undertaken this?

Per the Special Report released by Inland Revenue in relation to the additional disclosures required:

“The disclosure rules… support the Commissioner of Inland Revenue’s ability to assess compliance with the new 39% personal income tax rate and assist the Commissioner in understanding and monitoring the use of structures and entities by trustees.”

What are the new disclosure requirements?

In summary, with affect the 2022 income year onwards, trusts that file income tax returns must:

  • File an income tax return and provide additional disclosures (as set out in s 59BA of the Tax Administration Act 1994), which include:
    • Details of all beneficiaries that have received a distribution or received a benefit from the use of a trust asset. This will be of note to trusts holding the trustee’s main residence. The disclosure covers the details of the distributions and the movements in a beneficiaries current account. This may include overseas beneficiaries, if so, their tax jurisdiction and tax identification number is required.
    • Details of settlors and any settlements made during the year. This may include overseas settlors, if so their tax jurisdiction and tax identification number is required.
    • Details of any person who has the power to appoint or dismiss a trustee, to add or remove a beneficiary, or to amend the trust deed.
    • A breakdown of the assets and liabilities of the trust.
  •  Prepare financial statements which include:
    • Names of Settlors, Trustees and Beneficiaries.
    • Income and Expenditure.
    • Financial position of the Trust at year end.
    • Settlors and Beneficiaries current accounts.

What is Munro Benge doing?

These new requirements mean that a trust cannot simply file an income tax return anymore. Financial Statements must be prepared, and we will be asking more questions than usual to satisfy these additional disclosures. We will need to confirm details for all settlors, appointers, trustees and beneficiaries to ensure that all the information we provide to IRD on your behalf is up to date and correct.

We have already been working with you towards meeting some of these requirements with the preparation of financial statements for all trusts due to the 2019 Trusts Act requirements and the information we have gathered to comply with the Anti-Money Laundering and counter-terrorism financing reporting requirements. We will continue to do so to ensure that appropriate disclosures are being made to Inland Revenue.

What does this mean for you?

As the disclosure requirements increase, there will be an increase in the time required with trust administration such as keeping up to date with new beneficiaries or trustees, movements in residence of all parties, and the like. There will also be an increase in the time (and cost) for the preparation of the financial statements and tax returns. And, of course IRD will now have much more visibility of your business and personal affairs.

This is a good time to review your trust arrangements. We are finding that many of the reasons why people originally established their trusts no longer exist. We can work through your trust with you and determine the best solution for you going forward.

As always, if you have any questions, please do not hesitate to get in touch.