Since the trustee tax changes, IRD asks trusts for far more information than a simple return. If you have a family trust that earns income, the disclosure rules now apply to you whether or not the trust does much.
Quick answer
Most New Zealand trusts that earn income, other than a few exempt categories, must file full financial statements and detailed disclosures alongside their IR6. That covers settlements made to the trust, distributions out of it, and identifying details for settlors, trustees and beneficiaries. The aim is transparency, so IRD can see how trusts are actually being used across the country.
The detail, in plain English
The disclosure regime turned the trust return from a short form into a much fuller picture. For each relevant year an in-scope trust typically must provide:
- A statement of financial position and a statement of profit or loss, prepared to IRD's minimum standards, with the building blocks behind the figures.
- Details of settlements on the trust during the year, money or assets put in, and who made them.
- Details of distributions to beneficiaries, including the amounts and the nature of each.
- Information identifying settlors, trustees, beneficiaries and any person with a power of appointment or removal.
Some trusts are excluded from the full rules. The main relief is the non-active trust: a trust that earns no or only minimal income and has filed a non-active declaration is not required to file the full disclosure until it becomes active again. Certain charitable trusts and some foreign trusts also sit outside the regime. But the default position is that an income-earning family trust is squarely caught.
The disclosure does not usually change the tax, it changes the visibility. IRD uses the data to understand how income and assets flow through trusts, and the information can be cross-checked against beneficiaries' own returns.
A simple example
The Rata Family Trust owns a rental and a share portfolio. Even though its tax position is straightforward, it must now file proper financial statements, list the $10,000 the settlors added during the year, record the $6,000 distributed to an adult child, and identify everyone connected to the trust. None of that changes the tax bill, but leaving it out is a compliance failure in its own right and can attract penalties.
By contrast, a long-dormant trust holding only the family home and earning nothing can file a non-active declaration and step outside the full disclosure until it starts earning again. The difference is simply whether the trust is active.
Common mistakes to avoid
- Assuming a quiet trust is exempt. If it earns income, it is generally in scope, however simple it looks on the surface.
- Skipping the non-active declaration. A genuinely dormant trust should actively file the declaration rather than just go silent.
- Under-documenting settlements and distributions. These now have to be reported in detail, not just netted off in the accounts.
- Keeping poor records. The disclosure assumes you can identify every settlor, trustee, beneficiary and appointer, going back as needed.
- Treating it as optional. Disclosure failures stand on their own, even when the tax itself is correct.
Where this fits in your return
Disclosure attaches to the trust's IR6, not to your personal return, but it relies on the same underlying financial statements prepared at year-end. If the trust distributes to you, the related beneficiary income still flows onto your IR3, and IRD can match the two, which is part of why getting the trust's records and disclosure right protects everyone connected to it.
How Fernway can help
We prepare compliant trust financial statements, complete the full disclosure schedules, and advise whether a quiet trust should file a non-active declaration instead of carrying the full burden. The goal is that the trust meets every reporting obligation without you having to decode the rules yourself. See trust tax returns for how the numbers are taxed once disclosed.
This is general information only, current at the time of writing, and not personalised tax advice. Tax rules change and your circumstances may differ, so confirm your position with us or check ird.govt.nz before you act on it.
In plain English: an income-earning family trust now has to show IRD almost everything, so good records and complete disclosure matter even when the tax itself is simple.
This is general information, not personalised tax advice.See our full disclaimer.