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Family Trust Update from Harmans Lawyers

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From the beginning of the 2021/22 tax year Inland Revenue announced that family trusts in New Zealand must all now have an IRD number and will need to provide more information in their annual income tax returns.

This will require some work on the part of trustees to ensure that their trust meets these requirements, or to submit the necessary forms to register their trust with IRD as non-active. Read on to find out what you need to do to comply.

Trustees need to determine whether their trust is “active” or “non-active”.

Non-Active Trusts are those which:
• Have no, or very little, income (maximum $200.00 pa); and
• Have been registered as non-active with IRD.

Active Trusts are all trusts (subject to some exceptions such as Charitable Trusts) which do not meet the two requirements of non-active trusts – i.e. which have income above $200.00 pa or which have not been registered as non-active (even if they have no or little income).

Other than the need to obtain an IRD number and to register as non-active (by submitting a Non-Active Trust Declaration – IR633), the trustees of non-active trusts have no additional obligations.

Additional obligations for Active Trusts

There are additional disclosure obligations:

  1. Trustees of active trusts must now produce financial accounts. The complexity of these accounts depends on the assets that the trust holds. Trusts with assets of $5,000,000.00 or less may produce simple accounts (i.e. profit & loss and a balance sheet). Most active trusts will already be preparing accounts which will satisfy this requirement.
  2. Other disclosures need to be made to the IRD, including details about:

• All appointers and controllers of the trust;
• Settlements received by the trust within the tax year; and
• Distributions to beneficiaries from trust assets.

Who are Harmans Lawyers

Having operated in and around Canterbury since 1888, we’re immensely proud of our history in the region and the role we play in our local community. Over the years we have evolved and adapted to meet the needs of our clients, living both locally and further afield, expanding our team of highly qualified lawyers and exceptional support staff accordingly.

Harmans provides a comprehensive range of legal services – from asset protection, property law and family law through to commercial and business law and dispute resolution.

“We fundamentally believe that sound advice and quality legal services should be accessible and available to everyone, and we have gone to great lengths to blend outstanding service with a down-to-earth approach,” explains Managing Partner, Mark Sherry. “We are committed to creating an environment that reflects our core values of integrity, honesty, and reliability, while our forward-thinking, innovative mind-set allows us to tailor solutions and strategies to suit each client’s individual circumstances and requirements.”

Our skilled team are passionately committed to ensuring we provide our clients with a dynamic and positive legal experience.

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