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Changes to Covid-19 support payments | New reporting requirements for domestic trusts |

By November 3, 2021 No Comments
trafficlight

Changes to Covid-19 support payments

I expect that by now all of you are aware of the Government’s new traffic light system for managing Covid in the community. This red/orange/green framework will replace the existing four level system, and for Auckland, will come into effect as soon as 90% of the eligible population in each of the city’s three DHBs is fully vaccinated (three to four weeks if the weekend’s predictions become the reality).

Alongside the new framework announcement, there has also been a boost to the payments that are available to support businesses, primarily with respect to the resurgence support payment (RSP) which in essence will become a weekly payment although available in fortnightly instalments – presently the RSP is a three-weekly payment.

Effective from a first payment date of 12th November 2021 and remaining in place until Auckland moves to the new lighting system, a business will be able to claim $3,000 plus $800 per FTE, up to 50 employees – so a maximum claim of $43,000 per fortnight.

New reporting requirements for domestic trusts

Well, they did warn us that it was going to happen, to ensure that family trusts were not used as a vehicle to shelter incomes from exposure to the increased top personal marginal tax rate of 39% which was introduced effective 1st April 2021.

Released for review and feedback is draft Operational Statement ED0235 – “Reporting requirements for domestic trusts”. It’s a 46-page document which sets out how the Commissioner proposes to use her new trust information gathering powers, which are set out in section 59BA of the TAA, and were introduced with effect for the 2021-22 and later income years.

Going forward, the information you are likely to have to provide each year will include:

  • A statement of profit or loss and a statement of financial position,
  • Settlor and settlement details,
  • Beneficiary and distribution details,
  • Persons with powers of appointment; and,
  • Trustee details.

To ensure the compliance costs relating to the provision of additional information by the trustees are not overly burdensome on small trusts (income and expenses both <$30k; Total assets <$2m), an exemption from having to use accrual accounting will be available (so cash accounting can be used) and prior year comparable figures will not need to be reflected in the financial statements (material cost savings I question?).  

The commentary in ED0235 goes through each of the above bulleted items in quite some detail, to outline what the Commissioner will expect to be able to see in the information provided by the trustees.

And last but not least, under her new information gathering powers, the Commissioner will be able to make retrospective information requests, for the same details to be provided in relation to the 2014-15 income years onwards.

If you would like to have your say on ED0235, the deadline for comment is 30th November 2021.

Technical decision summaries

Now to end this week’s AWIR on a positive note, and news that certainly got me excited (which post reading this many of you may say – “it clearly doesn’t take much!”), IR have finally decided to publish for all to read, technical decision summaries (TDS) of adjudications (from mid-2021) and private rulings (for applications received on or after 1 January 2022). These TDS in my view, will provide some valuable insight into IR’s present interpretation of various issues that come before them, which naturally can then become a guidance yardstick when you are advising your own clients.

I’ve read the first couple which are now posted in IR’s Tax Technical section of their website and found both the format and content to be well worth the read. For those of you that may not be aware, the Adjudications Unit (AU) is basically the gatekeeper to IR pursuing the case to court – an ‘independent’ unit that takes a final look at the dispute and issues a ruling as to whether the IR team (which usually comprises the investigator and their legal rep who have been on the job from day one) have got it right or not. If the AU rules in favour of the taxpayer, then their decision is binding on IR, and the dispute ends there. However, if IR is seen to be on the right path, then AU’s decision of course is not binding on the taxpayer, who can then decide to take the dispute that next step to the courts.

Naturally therefore there will be numerous disputes which come to an end post the AU review, and having some insight into what the issue was and how the AU ruled, will be invaluable to any advisor trying to counsel their own client as to the likely response to their own issue by IR – which is usually one of the client’s first questions to us all.

Any TDS that I come across that I think will be of use to you all, I will certainly make note of in AWIR.

This article from the ‘A Week in Review’ newsletter was originally published Monday 25th October 2021. If you have any questions or would like a second opinion on any national or international tax issues, please contact me richard@gilshep.co.nz. 

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