Changes to the Family Trust law

 

 

All Family Trusts that own or are purchasing real estate will soon be required to have an IRD Number, even if the Trust earns no income.

Supplied by Arnet Law, Pukekohe

Family Trusts are incredibly popular in New Zealand, with many family homes owed this way. The trustees of the Trust are typically one or two family members, together with a professional advisor such as a lawyer or accountant. The trustees are the legal owners of trust property and hold that property “on trust” for the benefit of the family. In the case of the family home, the family members usually pay the rates, insurance and any mortgage payments themselves. No rent is charged and until now there has been no need to register the Trust with the Inland Revenue Department as there has been no income received by the trustees.
This will all change from October 1 when the Taxation (Land Information and Offshore Persons Information) Act will become law.
From October 1, all buyers and sellers of property will be required to disclose their IRD numbers. There will be some exceptions, but the rule will apply to Family Trusts and all properties they buy or sell, including the family home of the beneficiaries.
Many trusts earn income from rental, interest, or dividends and so will already have an IRD number.
Trusts which have previously received no income will probably not have an IRD number and will need to apply for one. It is not difficult to apply for an IRD number, however processing usually takes 8 – 10 working days, so trustees should not leave this to the last minute. You can apply for a Trust IRD number using a “non-individual” IR596 form. You will need a copy of the Trust Deed and a copy of any Deeds of Appointment or Retirement if the trustees have changed since the trust was established. All current trustees will need to provide their individual IRD numbers.

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