Some trusts are now required to provide more information in their annual income tax return (IR6).
The new rules apply to tax returns for the 2021-2022 and later income years.
What does it mean for you?
First, check our online tool below to see if your trust needs to comply with the additional reporting requirements.
Then, if you do need to comply, continue reading to see what that extra information is. The 2022 IR6, including the IR6B, IR6S and IR6P, have new fields to collect the information required.
Trusts that do not need to comply ‒ general rules
If a trust does not earn assessable income, it is not required to comply with the reporting requirements, even if it chooses to file an income tax return.
As estates are not trusts, estates will not be required to comply with the reporting requirements. An estate may progress to a point where assets are held on trust, in which case the trust will need to comply with the new reporting requirements (unless it does not earn assessable income or is one of the types of trusts listed below).
Other trusts that do not need to comply with the reporting requirements include:
- trusts that have made a non-active declaration (you can find the form - the IR633 - at the bottom of this page)
- foreign trusts
- trusts eligible to become Māori Authorities
- widely-held superannuation funds
- exempt employee share schemes
- debt funding special purpose vehicles
- energy lines trusts.
Does your trust need to comply with the additional reporting requirements?
The IR6 tax return now asks for additional information about the trust's financial performance and position, including:
- net profit or loss before tax
- assets (for example, land, buildings, and shares - and the methods used to value these assets)
- liabilities (for example, loans and other money the trust owes to creditors)
- equity (this means assets available to trustees after liabilities are taken into account).
If the trust would usually file an IR3R (rental income), IR3F (farming income) or IR10 (financial statement summary for business activities) form then they should continue to do so if they conduct those types of activities. These forms should only capture the transactions that relate to the specific activity.
The fields on the IR6 are intended to capture all income, expenses, assets and liabilities of the trust, even where those assets are not used to derive assessable income - so for many trusts these values will differ from their IR10.
A settlement is any transfer of value from a person (or entity) to a trust. A transfer of value is the giving or doing of something for less than market value.
Please give us details of any settlements made to the trust:
- details of the person (or entity) who made the settlement (the settlor)
- the nature and amount of the settlement.
These details are entered onto the 'Trust settlor details' (IR6S) form.
Settlor details required
Please include details of the settlor, including the name and date of birth (or commencement date for companies or other non-individuals), jurisdiction of tax residency and IRD number or Taxpayer Identification Number (TIN) for non-residents.
You need to give us details of any person (or entity) who has ever been a settlor of the trust (including historical settlors), but you won’t need to tell us the amount or nature of any historical settlement. For current year settlements, you must include the details of the settlor and the amount and nature of the settlement.
Settlement details required
The nature of settlements is broken down into the following categories:
- financial arrangements
If a settlement is of minor services that are incidental to the activities of the trust, you do not need to disclose it.
A loan to a trust is not a transfer of value so this is not a settlement. If the loan is later forgiven, the forgiveness is a settlement, and if the lender does not charge interest on the loan they also become a settlor.
A beneficiary is a person (or entity) who can benefit or does benefit from a trust.
Trustees can choose to allocate beneficiary income or make distributions to beneficiaries.
If a person receives an allocation of beneficiary income or a distribution during the year, please complete the 'Estate or trust beneficiary details' IR6B form, and identify the nature of the distribution under the following categories:
- accounting income and any other amounts
- use of trust property at less than market value
- distribution of trust assets
- forgiveness of debt.
In another section, you're asked to show the transactions into and out of the beneficiary's account.
Non-cash distributions that are minor and incidental to the activities of the trust do not need to be disclosed. There is no requirement to disclose details of beneficiaries or distributions that happened in the past, only those from the 2021-2022 year onwards.
You'll need a separate IR6B for each beneficiary.
A person (or entity) who holds a power of appointment has the legal power to add or remove trustees, add and remove beneficiaries, or alter the terms of the trust deed.
From the 2021-2022 income year onwards, trusts must tell us the details of any person (or entity) who holds a power of appointment. The details required are:
- full name
- date of birth (or commencement date for companies or other non-individuals)
- jurisdiction of tax residency
- IRD number/Taxpayer Identification Number (TIN)
- commence date (that the person acquired the power of appointment)
- cease date (that the person ceases to hold the power of appointment).
You can submit details of powers of appointment through your income tax account in myIR by selecting 'Manage power of appointment' or by paper through the post.