What is a Non-active trust?

The criteria which determines whether a trust is non-active has changed. Non-active trusts are now no longer required to file returns or comply with trust disclosure rules.

A trust is non-active for the 2021-2022 tax year if:

• Reportable Income was under $1,000
• There have been no deductions
• There have been no transactions which involve giving income to someone
• There are no transactions that provide a benefit which is subject to FBT to a current or former employee.

The following payments and costs do not affect the non-active status of a trust:

• Reasonable fees to administer the trust
• Bank charges or minimal admin costs that are $1,00 or less
• Costs related to living in a house owned by the trust that are incurred by the beneficiaries such as insurance, rates and interest.

Effective Date

The proposed changes will be backdated to apply the 2021-2022 tax year. This means if a trust is eligible to be non-active, there are 3 filing options. 

Options for Filing and Disclosures

1. File a return and supply limited disclosure information

Under this option, a return is filed, and, in the return, it should be selected that the trust is not required to comply with the trust disclosure rules. Along with this, the variation recording spreadsheet should be completed and details of any person who has made a settlement on the trust disclosed. No further action is required.

2. Complete the spreadsheet provided by IRD and not file a return

Under this option, a return is not filed to IRD and instead the spreadsheet linked above is completed. Under option 2, a non-active trust declaration will need to be completed before 30 June 2023.

3. File a return along with full disclosure information

Under this option, a return will be filed as usual.

For further information regarding non-active trusts, get in touch with us below. 

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