A while ago we wrote about the new Trusts Act 2019 that came into effect on 30 January 2021. You can read the blog here.

As a nation we love trusts, there are up to 500,000 of them established in New Zealand and if you are reading this there’s a good chance you are involved in a trust. If this is the case, we encourage you to read more below.

Trusts & tax

Unlike individuals, trusts pay a flat rate of tax, currently 33%. This was fine when individuals paid no more than 33% on their income, but now that the top marginal tax rate is 39%, suddenly there’s an incentive to funnel income into trusts instead of it being taxed at the individual level.

To allow Inland Revenue to better monitor how trusts are used, amendments were made to the Income Tax Act 2007 to require trusts to report more information to IRD including details on beneficiaries, settlements on the trust, and financial information on the trust’s activities.

New draft determination

A draft determination from Inland Revenue explains a little more about how they intend to apply the new rules. The good news is that smaller trusts won’t have to worry about some of the disclosure requirements. It is proposed that trusts will not have to comply with the new disclosure requirements if they have less than $30,000 of income, less than $30,000 of expenditure in an income year, and held less than $2m of assets in that income year. This is not set in stone yet so watch out for more information on this.

Please get in touch with us if you are unsure of your obligations.