Trust tax returns - new rules
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Articles by The Professional Trustee Team
Filing tax returns for trusts is becoming more complicated, and trustees need to be aware of this.
From the 2022 financial year onwards (i.e. year ending 31 March 2022), additional information must be included in a trust’s tax returns. None of this is particularly difficult, but gathering the information the IRD requires is going to be more time consuming than it has been in the past, especially if the trust has been involved in multiple transactions during the year.
What information does the IRD require for trust tax returns?
- Statement of profit/loss
- Statement of financial position
- Name, date of birth, jurisdiction of tax residency, local and foreign IRD number (if applicable) of:
- Settlors of the trust for the current financial year, as well as prior income years where that information has not already been disclosed to IRD. This means there is an expectation that when the 2022 return is filed such detail will be included for every settlor from the day the trust was set up until that point in time. Of course, this is completely unreasonable so the IRD have indicated that they will accept whatever information is reasonably available.
- Beneficiaries who received distributions during the year
- Appointors of the trust (i.e. people with the power to appoint and remove trustees and/or beneficiaries, or to amend the trust deed)
- Amount and nature of each distribution made in the income year
Exceptions
The main exception to these rules is if the trust is non-active (i.e. derives no income and has no deductions). A typical example would be a trust that just owns a family home. To qualify, the trust must have filed a non-active declaration with IRD.
Foreign trusts are the other exception because they already provide this information in their annual foreign trust returns.
Summary
With the extra information now required, it is likely preparing trust tax returns will take more time and effort than many trustees have been used to. Talk to your accountant about what is involved. And if you don’t already have an accountant for your trust, contact us at GRA to see how we can help you.
The Professional Trustee Team
© Gilligan Rowe & Associates LP
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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
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