New Zealand's Inland Revenue Department has undertaken a comprehensive revision of its guidance pertaining to trust taxation.
This fresh guidance serves as an update and replacement for the previous guidance issued in 2018, which was covered in Interpretation Statement 18/01 (IS 18/01). Notably, substantial changes have been introduced to the existing guidance. In light of these alterations, the Inland Revenue has released a consultation reading guide to offer an overview of the key modifications for public input.
The statement essentially serves as a comprehensive resource explaining how income earned by trustees and beneficiaries within a trust is subject to taxation. Furthermore, it outlines the various compliance obligations that settlors, trustees, and beneficiaries must adhere to under the purview of tax law.
The significant changes in this guidance stem from legislative amendments to the trust rules since the issuance of IS 18/01. It's important to note that this guidance does not address the proposed alterations to the trustee tax rate and related measures announced in May 2023.
Although the new guide has expanded in size, stretching to 161 pages primarily due to layout changes, its structure remains consistent with the previous publication, organized into 13 parts.
Certain parts of IS 18/01 remain largely unchanged, such as Parts 4 and 12. On the other hand, Parts 10 and 11 have undergone a complete rewrite to accommodate new options allowing trusts to make elections or voluntary disclosures to attain complying trust status. These two sections pertain to transitional matters related to becoming a resident trust and becoming a non-resident trust, respectively.
The changes take into account the following legislation:
The Taxation (Annual Rates for 2017–, Employment and Investment Income, and Remedial Matters) Act 2018;
Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018;
Taxation (Annual Rates for 2018–, Modernising Tax Administration, and Remedial Matters) Act 2019;
Taxation (Annual Rates for 2019–, GST Offshore Supplier Registration, and Remedial Matters) Act 2019;
Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020;
Taxation (Annual Rates for 2020–, Feasibility Expenditure, and Remedial Matters) Act 2021;
Taxation (Income Tax Rate and Other Amendments) Act 2020;
Taxation (Annual Rates for 2021–, GST, and Remedial Matters) Act 2022;
Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Act 2023.
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