Significant reporting and disclosure changes looming for New Zealand trusts

Tax Alert - November 2021

By Veronica Harley & Anna Zhang

Inland Revenue has released not one, but two consultation documents on the new reporting and disclosure requirements for domestic trusts which will apply from the 2021-22 income year. Essentially new standards for preparing minimum requirement financial statements for trusts are being introduced. In addition, the finer details on information (mostly around settlements and distributions) that must be disclosed when filing the annual tax return, as well as how Inland Revenue intend to administer these rules has been released.

One consultation paper is an Officials’ issues paper released by Inland Revenue Policy and Regulatory Stewardship team (“Reporting requirements for domestic trusts: where disclosure is required under the Tax Administration Act 1994”). This item outlines the proposed minimum requirements for financial statements for trustees.

The other consultation paper is a draft operation statement issued by Inland Revenue’s Tax Counsel Office (“Reporting requirements for domestic trusts”). This item outlines the Commissioner’s approach to applying her new trust information gathering powers.

Given we are already past halfway through the 2021-22 income year, it is imperative that trustees consider these new rules and understand their new obligations.

Why the new rules and who is affected?

To support Inland Revenue’s ability to assess compliance with the new 39% personal income tax rate and monitor the use of structures and entities by trustees, new trust disclosure rules were enacted under urgency late last year with no prior consultation. These new rules apply for the 2021-22 income year and onwards. Inland Revenue suggests that as many as 180,000 domestic trusts will be affected by these new disclosure requirements.

Trustees of trusts with assessable income are generally within the scope of the rules, with a few exclusions, such as for trustees of non-active trusts, charitable trusts and foreign trusts. It is important to note that each trustee under the trust has the obligation to comply with the new disclosure rules. Where a trustee is not a New Zealand tax resident, the obligation falls to any New Zealand tax resident settlor of the trust. Our March Tax Alert Article has discussed some of the key implications of the rules which you may wish to recap.

Proposed minimum requirements for financial statements

The 'Reporting requirements for domestic trusts' issues paper sets out the proposed financial reporting requirements and information that financial statements must show. Once finalised, an Order in Council will be published to bring the rules into force.

There is a list of requirements the financial statements must comply with to meet the minimum standards. Nevertheless, Inland Revenue recognises this may add unintended burden onto “small trusts”, and so proposes a de minimis exception to provide partial relief to small trusts. These are trusts for which the trustee has not derived annual income in excess of $30,000, or incurred annual expenditure in excess of $30,000 during the income year, and the total value of trust assets does not exceed $2 million within that income year. The table below shows the minimum standards and areas of partial relief for small trusts.


Reporting requirements


Domestic Trusts


Small Trusts with partial relief


A statement of financial position setting out all the assets, liabilities, and net assets of the trust at the end of the income year




A profit and loss statement showing income derived, and expenditure incurred, by the trust during the income year




Accounting principle of double entry method for recording financial transactions




Accrual accounting




Disclosing amounts using the most appropriate valuation principle between tax values, historical cost, and market values




A statement of accounting policies




Showing required information (discussed below) in the financial statements




Disclosing comparable figures for the previous income year (if applicable)




Inland revenue expects that 38% of trusts will qualify for the de minimis rules but is seeking feedback on the partial exemption requirements for “small trusts”.

Financial information to be included

The issues paper lists proposed information that must be shown in the financial statements. Broadly this will include a reconciliation between the financial statements and taxable income; a reconciliation of movements from opening to closing balances, on a line-by-line basis, of all beneficiary accounts and loans; a schedule of fixed assets and tax depreciation; and quite detailed information on transactions with associated persons. A trust will also need to include amounts from the financial summary form (IR 10), which generally applies to trusts with business income, as well as non-business assets and liabilities.

The issues paper makes it clear that trustees will be obliged to prepare and hold the financial statements, but that the financial statements will not be required to be filed with the tax return. Instead they will need to be provided on request.

Additional trust information gathering power and disclosures to be made

The second document released for consultation is a draft operational statement ED0235 which sets out the Commissioner’s approach to applying her new trust information gathering powers in section 59BA of the Tax Administration Act. The obligation to provide further information is in addition to the minimum financial statements requirement. Essentially this is the information that will be required to be disclosed when filing the tax return. This may include:

  • A statement of profit and loss and statement of position in the prescribed form. Broadly, certain information from the financial statements will need be summarised in the prescribed form (currently either an IR 10 or IR 6/6B)
  • The amount and nature of any settlements made from the 2021-22 income year onwards (except for settlement arising from minor services incidental to the activities of the trust)
  • Details of settlors and of any settlements made on the trust during the 2021-22 income year or later income years, or whose details have not previously been supplied to the Commissioner
  • Details of every beneficiary who receives a distribution from the trust during the 2021-22 income year or late income years, and the amount of the distribution
  • Details of any persons who have a power to appoint or dismiss a trustee, add or remove a beneficiary or amend the trust deed
  • Any other information required by the Commissioner

Beware the CIR can go back to the 2015 income year

When these rules were enacted late last year the Government also included a retrospective information gathering power which can allow the Commissioner to request the above trust information as far back as the 2014-15 income year. Inland Revenue figures that taxpayers are required to keep records for seven years after the end of the income year anyway so trustees should be able to provide this on request. The information need only be provided to the extent that the information is in the knowledge, possession, or control of the trustee.

What’s next?

Submissions on the draft officials’ issues paper can be submitted by 15 November 2021, and by 30 November 2021 for the draft operational statement. There is a lot of detail in these new proposals when both statements are viewed together. We note the draft operational statement on information required to be filed with the tax return is 46 pages alone.

Practically these rules will apply in the second quarter of next year as the 2022 tax returns start to be prepared. We expect that these new rules will result in increased compliance costs for trustees.

If you would like to make a submission or wish further information please contact your usual Deloitte advisor.

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