Trust Disclosure Regime

After the introduction of the Trust Disclosure rules in March 2022, in November 2023 Inland Revenue released a high-level summary (in the form of a 40-page report) of insights from the first year of reporting.

While tax advisors and clients alike may have begrudgingly completed the disclosures initially, the statistics may prove to be interesting.

The stated purpose of the trust disclosure rules was to provide insights into the way trusts are used, and to ensure compliance with the 39% individual tax rate. The information gathered included reporting on details of settlors, individuals with powers of appointment, beneficiaries, and various financial information.

A recurring theme throughout the report was the level of errors, but not surprising given the complexity of the disclosure rules and it being the first year. Of the 226,000 IR6s received, the errors included:

Conversely, there were also numerous trusts that complied with the rules despite not being required to – including 35,000 trusts filing nil tax returns, of which 11,500 provided financial information.

Other key insights into trust income and assets included:

Total trust assets amounting to $470 billion, which was up from $240 billion reported on the IR10 in 2016.

As a result of the information gathered, the Government may consider policy reform to address some of the issues identified – such as implementing a two-month payment notification requirement for beneficiary distributions to charities, in line with Australia’s regime. Greater scrutiny of Trust tax affairs is expected, especially as the Government has   provided additional funding to complete audits and investigations. 

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