The Trusts Act 2019 and the New Reporting Requirements (Tax Administration Act)
From the introduction of the Trusts Act 2019 on 30 January 2021 to the new reporting requirements for domestic trusts, it is more important than ever to be aware of your duties as Trustee and to take steps to ensure you are complying with these.
The Trusts Act 2019 defines Trustees’ duties and a Trustee’s obligation to keep and give trust information. There are two categories of duties being Mandatory duties (which must be complied with) and Default duties (which can be modified or excluded in terms of the Trust Deed). These default duties include a Trustee’s duty not to exercise power for their own benefit, a duty to be impartial between Beneficiaries and a duty to invest prudently.
A Trustee must also keep core documents including the Trust Deed and any variations, records of the trust property that identify the assets, liabilities, income and expenses of the trust and that are appropriate to the value and complexity of the trust property, contracts, accounting records and other supporting documents.
There is also a presumption that Trustees will provide Beneficiaries with basic trust information with the rationale for this being to hold Trustees accountable to the Beneficiaries.
Recently introduced are the new Trust reporting rules which are set out in s59BA of the Tax Administration Act 1994.
Pursuant to this section, a Trustee of a trust who derives assessable income for a tax year must file a return for the tax year. If a Trustee is required to file a return for a tax year, they are required to comply with the new reporting rules unless one of the exclusions apply.
This includes providing information such as:
- A statement of profit or loss and a statement of financial position;
- Details of each settlement;
- Details of the settlor who makes each settlement;
- Details of distributions;
- Specific details of any beneficiary who receive a distribution;
- Specific details of each person who has certain powers under the trust deed including to appoint and remove trustees and beneficiaries.
There are certain trusts that the new reporting rules do not apply to such as non-active trusts that have filed a non-active trust declaration and foreign trusts. That being said the trustee of such trust may still be required to file a tax return if the trustees derive assessable income during the income year.
The Commissioner may require trust information for a period after the 2013-2014 income year and ending before the beginning of the 2021-2022 income year.
If you have a trust to which the new rules are applicable to, each trustee is individually responsible for providing information although only one return is filed.
It may be timely to review your trust and supporting documents to ensure you are meeting your duties as Trustee including providing information to beneficiaries.
If you think the new reporting rules apply to your trust, it would be prudent to take tax advice from your accountant to check if they do and if so, what is required from you as Trustee.
