MEDIA RELEASE (NZ)

While the Government’s decision to repeal annual trust disclosure rules is a win for productivity and red tape reduction, it also offers a cautionary tale for the government, says Chartered Accountants Australia and New Zealand.  

“The original disclosure rules were introduced under urgency in late 2020, without consultation, and imposed significant compliance costs on taxpayers,” said CA ANZ NZ Tax Leader John Cuthbertson FCA.

“This repeal is a positive step for trustees, particularly those managing small trusts to protect property, manage assets and facilitate succession planning.”

In 2023, nearly all respondents of a CA ANZ survey said they had experienced increased costs due to the trust disclosure rules, with many citing significant complexity and time burdens.

“There’s some irony in the fact that the disclosures revealed that in the 2022 income year, 81% of total trust income was earned by just 11% of trusts, highlighting that smaller trusts shouldn’t have been included in these disclosures to begin with.

“Officials now have four years of data, and the environment has changed with the alignment of the top personal and trustee tax rates at 39%. It’s time to move on.” said Mr Cuthbertson. 

However, CA ANZ has cautioned that Inland Revenue may still seek to collect similar information under general powers in sections 33 and 35 of the Act.

“We urge Inland Revenue to exercise restraint and only collect information that is genuinely needed and not otherwise available from public sources and to be mindful of taxpayer compliance costs,” said Mr Cuthbertson. 

“Any ongoing disclosure requirements should be proportionate, targeted and subject to continuous review.”

“Small trusts should be excluded entirely from future disclosure requirements, given their limited income and disproportionate compliance burden.

“Any disclosures for large trusts should be scaled back, focusing on readily available financial information and aligned with Inland Revenue’s information collection framework.

“Rigid legislative demands for information have a very real cost to the economy. It’s much more effective to have flexible, consultative approaches such as one-off questionnaires or census-style data collection. 

“Initial gaps in Inland Revenue trust information regarding settlors, trustees and beneficiaries could have been collected in this way, with substantively pared back information requested in the annual tax return process.

“Although the disclosures provided some useful information, they should have only applied to larger trusts and for a limited period of time. Replicating these requirements under general powers would be a step backwards.”

The repeal is included in the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill and will remove sections 59BA and 59BAB of the Tax Administration Act.