Reduced disclosure requirements for small trusts

We are changing the criteria for trusts to declare they are non-active so that they are not required to file returns. If your trust is not required to file a return, it also does not need to comply with trust disclosure rules.

If your trust is eligible to be non-active for the 2021 – 2022 tax year, there are 3 filing options you can choose from.

Our proposed changes will be backdated to apply to the 2021 – 2022 tax year. So, if your trust is eligible to be non-active for that year once these changes are passed into law, you can choose one of the 3 filing options.

Non-active trust criteria

Your trust is non-active for the 2021 – 2022 tax year, if:

its only income was $1,000 or less of reportable income
it had no deductions
it has not been involved in any transactions that give income to someone
it has no transactions that give a benefit subject to FBT to a current or former employee.

Costs and payments that do not affect your trusts non-active status.

Reasonable fees for administering the trust.
Bank charges or minimal administrative costs that are $1,000 or less for the year.
Insurance, rates, interest, and other costs related to living in a house owned by the trust and incurred by the beneficiaries of the trust.

Testamentary trust

A testamentary trust is non-active for the 2021 – 2022 tax year, if:

it has not made distributions to beneficiaries of more than $100,000
its only income was $5,000 or less of reportable income
it has non-reportable income of up to $1,000 and has deductions that would reduce the net income of the trust to below $200.

Options for filing and disclosures

Option 1 - File a return and apply the variation by supplying limited disclosure information

For this option you need to:

file an income tax return
in the return select that the trust is not required to comply with the trust disclosure rules
complete the details on the 59BA(5) variation tab of the Variation recording spreadsheet to disclose details of any person who has made a settlement on the trust during the year.

If you choose to use option 1, completing these steps will meet the trustee's filing obligations for the year. You do not need to take any further actions.

Completing the spreadsheet

Complete the spreadsheet with the following information.

Column A: The IRD number of the trust.
Column B: The name of the trust.
Column C: The tax year that the variation applies for.
Column D: Whether the trust meets criteria A or criteria B.
Column E: Whether there have been any settlements on the trust during the year.

Only continue to complete columns G onwards if you have answered YES in column E.

Column G: The settlor's legal name.
Column H: The settlor's date of birth.
Column I: The settlor's jurisdiction of tax residency.
Column J: The settlor's NZ IRD number (if they do not have one leave this blank).
Column K: If the settlor has tax residency outside of NZ, their tax identification number (TIN) (if columns L or M apply leave this blank).
Column L: Tick here if the settlor does not have an IRD# or a TIN because they are not required to.
Column M: Tick here if the settlor is resident in a jurisdiction that does not issues TIN's.

If more than one person has made a settlement during the year, then continue to complete the additional columns to record their details.

Option 2 - Complete the spreadsheet below and not file a return

For this option you:

do not file an income tax return
complete the details on the spreadsheet to disclose the details of the trust (the tab labelled Option 2)
In the Variation recording spreadsheet declare that the trustees will be eligible to make a non-active declaration once the amendment is passed into law.

The amendment refers to section 43B in the Taxation (Annual Rates, for 2022-23, Platform Economy and Remedial Matters) Bill (No 2).

If you choose to use option 2, you will need to complete a Non-active trust declaration - IR633 for the year once the amendment becomes law. You will need to complete the declaration before 30 June 2023.

Completing the spreadsheet

Column A: The IRD number of the trust
Column B: The name of the trust
Column C: The tax year that the variation applies for
Column D: Whether the trust meets criteria A or criteria B
Column E: Confirm that the trust will be eligible to make a non-active declaration once the new legislative criteria apply.

Option 3 - File a return and full disclosure information

File an income tax return and provide the full disclosure information.

You do not complete the spreadsheet below.

If you choose option 3 you should continue to file your returns as normal.

Submitting the spreadsheet

If you choose option 1 or option 2 you need to fill out the spreadsheet and email it to us at [email protected] by 1 March 2023.

Variation recording spreadsheet 2022 (XLSX 57KB) Download form