2021 Trust Changes

Updated: Dec 12, 2021


2021 Trust Changes Know

OCTOBER 2021 UPDATE WITH THE LATEST TRUST ACCOUNTING CHANGES


THE IRD HAS SENT OUT AN OUTLINE OF THEIR REQUIREMENTS FOR DISCLOSURE


FOR THE INCOME YEAR ENDING MARCH 2022


Inland revenue has made some proposals for the minimum reporting requirements that they will require this year.


In prior years trusts have filed returns declaring taxable income including distributions to beneficiaries that are subject to NZ tax, but they have not been required to file financial statements, nor provide details of transactions which are not subject to tax.


This is to change from the 2022 tax year (from 1 April 2021 in most cases) and later income years, with trusts being required to prepare IRD minimum standard reporting and significant other disclosures.


Their Requirements Include:

  • The Financial Statements should be based on the double-entry method of recording financial transactions and the principles of accrual accounting.

  • The statements should include a statement of accounting policies and changes.

  • Amounts may be disclosed using tax values, historical cost, or market values at the discretion of the preparer of the statements.

  • The statements should include a reconciliation between the profit and loss in the financial statements to the taxable income and movements from opening balances to closing balances on a line-by-line basis of all the:

  • beneficiary accounts

  • settlors accounts

  • movement in equity

  • loans and liabilities

  • property, plant and equipment.

  • Any transactions involving associated persons unless they are a minor.

  • There will be an exception for small trusts if the trustee has not derived annual income in excess of $30,000, or annual expenditure in excess of $30,000 during the income year and the trust total assets do not exceed $2,000,000 within the income year. This is the de minimis exception proposed.

This provides a large increase in compliance for trusts in that a lot of this information is not always readily available. Trustees should be starting to think about how to collect this information now if they don’t have it readily available.


If a trust does not derive assessable income, it is not required to file a return and the disclosure requirements do not apply. This includes, for example, trusts that own holiday homes and derive no assessable income. An IR633 Non-Active trust declaration would need to be filed with the IRD.