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Administration of trusts

Trustees must comply with tax administrative obligations.  The extent of these obligations will depend on the nature of the trust’s assets.

If a trustee earns any income, the trust must be registered with the Inland Revenue.  The trustee must file an annual return (IR 6).  The trust must also register or GST if the trust is making taxable supplies.

Record keeping

A trustee that carries on business must maintain business records.

If a trustee has had any debt forgiven, the trustee must keep a record of the amount(s) forgiven and details of any amount(s) distributed to beneficiaries.

Resident trustees of foreign trusts must also maintain records even if no income is derived in New Zealand.

In addition to business records a trustee should also retain:

  • a copy of the trust deed
  • any deeds of variation
  • contact details for all trustees and beneficiaries
  • any trust accounts and tax returns
  • a schedule of assets and liabilities
  • a gifting schedule
  • a record of imputation and RWT credits

RWT obligations

A trustee that recieves interest income must deduct RWT unless the trustee holds a RWT deduction certificate or the interest payer has deducted RWT.

Tax charities have record keeping obligations

A registered charitable trust that is exempted from income tax is not required to file a tax return.  However, the charity must still prepare and retain accurate records showing the source of funds and how the funds have been applied.

Family home is the trust’s sole asset

If a trust’s sole asset is a family home and the home is not used in the production of any trust income, the trust does not require an Inland Revenue number.

Trust and estate income tax returns

For guidance see: 

http://www.ird.govt.nz/forms-guides/title/forms-t/ir288-guide-trusts-estates.html?id=righttabs

References:

  • Goods and Services Tax Act 1985, s 57
  • Income Tax Act 2007, s RE 2
  • Tax Administration Act 2007, s 22, 58
  • Vicki Ammundsen, Taxation of Trusts, ed 3, CCH New Zealand Limited (2016) chapter 19

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