Since the trust disclosure rules came into force in the 2021–22 income year, trusts have been firmly back on the IRD’s radar. What began as an annual information exercise has quickly become a useful data set for IRD, giving them far better visibility into how trusts operate, who benefits, and how closely trusts are connected to other entities.
For trustees, particularly those managing DIY or low-touch trusts, this is not something to gloss over. The new regime has changed what IRD can see, and how easily they can identify issues.
A reminder of what must now be disclosed
Each year, most NZ domestic trusts with assessable income need to provide additional information with their trust return, beyond the usual income and expenses.
In plain English, IRD is looking for details that help them understand:
- who is involved (settlors, trustees, beneficiaries)
- what changed during the year
- who received distributions, and what type of distributions they were
- what the trust owns and owes (via financial statements, including a balance sheet)
- whether there are loans in and out of the trust.
IRD has also published guidance on common errors, which is a useful clue as to where mistakes often happen.
IRD’s growing focus on connections and control
One of the biggest shifts since 2022 is IRD’s ability to map relationships. The disclosure data makes it easier to see links between:
- trusts and the individuals behind them
- trusts and trading companies
- beneficiaries who are also shareholders, directors, or employees
- loans and income flows between related parties
This ties into the wider “associated persons” rules, which are designed to make sure transactions are taxed correctly even when they happen between related people, trusts and companies.
From IRD’s perspective, the key question is often not “is there a trust?”, but “who is really benefiting, and how?”.
Common red flags IRD is looking for
In practice, IRD attention tends to increase where:
- the trust’s paperwork does not match what’s actually happening
- distributions appear to be done “on paper” only
- the trust looks like it’s being used as an informal bank account
- loans exist with vague terms, no repayments, or unclear purpose
- key details are missing or repeatedly entered incorrectly
DIY trusts are particularly exposed here. They’re often set up with good intentions, but administration slips over time and no one quite realises the rules have moved on.
Why “we’ve always done it this way” no longer works
Before the disclosure changes, many trusts operated with limited visibility. That environment has gone. IRD now has year-on-year data, can compare patterns, and can quickly spot inconsistencies.
It’s also worth remembering that filing and accuracy obligations still sit with the trustees. Where returns are late or incorrect, penalties can apply.
Practical steps trustees should be taking now
If you are a trustee, a few proactive steps can significantly reduce risk:
- complete annual trustee resolutions and make sure they reflect real-world activity
- review beneficiary distributions and related-party loans for consistency
- ensure trust financial statements are complete and accurate
- keep trustee, settlor and beneficiary details up to date (and consistent year to year)
- get advice if the trust no longer serves a clear purpose, or the admin has fallen behind.
In summary
The trust disclosure regime is not just a compliance exercise. It signals how closely IRD is now examining trusts and the people behind them. Trustees who stay organised, transparent and up to date are unlikely to attract unwanted attention. Those relying on outdated habits or informal management are taking on unnecessary risk.
If you’re unsure whether your trust is meeting current IRD requirements, we’re happy to help you review it – please get in touch.
Further information
Insights from the first year of trust disclosure rules (IRD)