How to Fill Out an IR10 Form: A Step-by-Step Guide for New Zealand Trusts

Receiving an IR10 tax form for your trust or estate can seem daunting, but the process is straightforward once you break it down. This guide will walk you through filling out the form step by step.

The IR10 is the form used by trusts, estates, and Māori authorities in New Zealand to report their annual income. Think of it as a tax return for the trust, where you must declare all income, claim eligible expenses, and determine the correct tax liability.

Before You Start: Gather Important Documents

Being organized will make the process much easier. Before you begin, gather the following information:

• The trust's IRD number.
• The full names, IRD numbers, and dates of birth for all beneficiaries who will receive income.
• Income statements for the financial year (typically 1 April to 31 March), including:
  • Bank interest statements and Resident Withholding Tax (RWT) certificates.
  • Dividend statements from any shares the trust owns.
  • A summary of rental income if the trust owns a rental property.
  • Details of any other income, such as from a business or foreign sources.
• Records of all expenses, such as invoices and receipts for accounting fees, bank charges, property rates, insurance, and repairs.

Step 1: Fill in the Basics on the Front Page

Start with the basic details of the trust or estate on the front page of the form.

1. Trust Name and IRD Number: Write the full, legal name of the trust and its IRD number at the top.
2. Tax Year: Enter the start and end dates for the tax year you are filing for. For most trusts, this will be from 1 April to 31 March.
3. Contact Person: Provide the name, phone number, and address of the person Inland Revenue should contact with any questions. This is usually the trustee who handles the administration.

Step 2: Reporting Income

This section is the core of the tax return, where you list every source of income the trust received during the year.

• Gross Interest: Add up all interest earned from the trust's bank accounts. Report the full gross amount before any tax has been deducted.
• Gross Dividends: Sum up all gross dividends received from shares. This information will be on your dividend statements.
• Rental Income: If the trust owns a rental property, report the total rent received for the year.
• Other Income: Use this section for any other income, such as from a business the trust operates or from overseas sources.

Add all these figures together to calculate your Total Gross Income.

Step 3: Claiming Expenses

A trust can claim deductions for expenses that were necessary to earn its income. You cannot claim private expenses or capital costs (like the purchase price of a property).

Common deductible expenses for a trust include:

• Accounting fees for preparing tax returns.
• Bank fees on the trust's account.
• For rental properties: rates, insurance, mortgage interest, repairs, and maintenance.
• Administration costs directly related to managing the trust's income.

Add up all allowable costs to find your Total Expenses.

Step 4: Allocating Income (Beneficiary vs. Trustee Income)

This is a critical step that impacts the trust's final tax bill. First, you must calculate the trust's net income for the year.

Net Income = Total Gross Income - Total Expenses

Once you have the net income, you must decide how to allocate it. The income can be distributed to beneficiaries or retained within the trust.

Beneficiary Income

This is any portion of the net income that is formally allocated to a beneficiary. This income is then taxed at the beneficiary's personal tax rate. Allocating income to beneficiaries on lower tax rates can be an effective way to reduce the overall tax paid. You must report the name, IRD number, date of birth, and the amount allocated to each beneficiary.

Trustee Income

This is any net income that remains after distributions to beneficiaries. If no income is allocated to beneficiaries, all net income becomes trustee income. This income is taxed at the trustee tax rate, which is currently 39%. Always check the IRD website for the latest rate.

Step 5: Calculating Your Tax

The form will guide you through the final tax calculation. The process involves a few key steps:

• Calculate the tax due on the Trustee Income at the 39% rate.
• Subtract any tax credits. These credits reduce the tax payable and include RWT already paid on interest and imputation credits attached to dividends.
• The final result will be your terminal tax to pay or your refund.

Step 6: Declaration and Signature

Finally, a trustee must sign and date the form. By signing, you declare that the information provided is true and correct to the best of your knowledge.

A Final Note

Filing becomes much easier after the first time. The key is to keep excellent records throughout the year. Maintain a separate bank account for the trust and diligently track all income and expenses as they occur.

If your trust's affairs are complex—for example, if it runs a business or owns multiple properties—it is wise to seek help from a professional accountant. They can ensure compliance and help you make smart tax decisions for the trust and its beneficiaries. Many people also find it simpler to file online using myIR, which can pre-populate some information automatically.