Finance – More complexity for Trusts

I wrote in this column a few publications back, about the new rules surrounding Trust laws. 

Changes to these laws have meant that the tax filing requirements for Trusts have become significantly more complicated and a lot more information is now required.

Firstly, non-active Trusts are entitled to earn up to $200 of bank interest without being required to file a tax return with the Inland Revenue Department (IRD) and can remain non-active for tax purposes. Once this level of interest is exceeded, the Trust is no longer deemed non-active and is required to file a tax return.

Accountants are now required to provide details of the settlors of the Trusts, which include names, date of birth and IRD number or TIN number (for overseas residents) – even though the settlor may not be a beneficiary and receive income from the Trust. 

Reporting will also be required on any settlement made during the year.

Although the details of the beneficiaries receiving income have been required prior to these changes, the IRD now require details of the movement in the beneficiaries’ account during the year – including any distributions, forgiveness of debts and drawings taken by the beneficiary during the year – and the tax return will now show the closing balance for the year for each beneficiary who, in that year, received income.

If you have been filing your own Trust tax returns prior to these changes, we recommend seeking the advice of a professional to ensure that you are in compliance with the new requirements.

If you are unsure whether or not your Trust is fit for purpose or need it reviewed, get in touch with a Trust lawyer who can review this for you and offer guidance in this field.

Quick facts:

•  If you have struggled to pay your tax over the Covid period you may be entitled to some relief on any penalties charged by the IRD under the Covid Relief rules.

• With the IRD’s new tax system, if you only have income from salary and wages (including pensions) and investments, most of this will now be available on the IRD website and the IRD should complete the assessment for you of any tax owing or refunds due.

• Under the new Brightline rules, if you intend to sell your investment property, get in touch with your tax agent as soon as possible as the tax triggered by the Brightline may be over $60,000 which will be subject to interest.