Let’s talk about Non-Active Trusts in New Zealand. If you’ve got a trust but it’s just sitting there, not earning income, you might be wondering—do I still have to file a tax return?
Great news: maybe not! If your trust meets the Inland Revenue (IRD) criteria, it could qualify as a dormant trust (also called an inactive trust), meaning no tax return, no unnecessary compliance headaches, and no extra paperwork. Sounds like a win, right?
But here’s the thing—just because your trust isn’t bringing in cash doesn’t mean you can ignore the filing requirements. There are rules, obligations, and steps you need to follow to make sure the IRD doesn’t come knocking.
In this guide, we’ll break it all down: what a Non-Active Trust is, how to apply for this status, and what it means for your tax obligations. Let’s make sense of it all—without the legal jargon! 🚀
What Is a Non-Active Trust in New Zealand?
If you have a trust that’s just sitting there—no income, no distributions—you might not need to file a tax return. That’s because New Zealand allows certain trusts to be classified as non-active, meaning fewer compliance requirements and less paperwork. Sounds great, right? But before you assume your trust qualifies, let’s go over what a non-active trust actually is, how it differs from an active trust, and why this status might be a game-changer.
Definition and Legal Criteria
A non-active trust is one that meets specific Inland Revenue (IRD) conditions. In simple terms, this means:
✅ It doesn’t earn income (no rent, no dividends, no interest—nothing taxable).
✅ It doesn’t distribute money to beneficiaries.
✅ It only holds assets that aren’t generating income.
✅ It has minimal expenses, like bank fees, but nothing major.
If your trust fits these criteria, you can apply to the IRD to register it as non-active. Once approved, you won’t have to file a tax return each year—one less admin task to worry about!
Difference Between Active and Non-Active Trusts
Think of an active trust like a business—it’s doing things. It earns money, makes payments, and has tax obligations. If your trust owns rental property, collects interest, or distributes income, it’s active and needs to file tax returns.
A non-active trust, on the other hand, is like an empty bank account. It holds assets but doesn’t make financial moves. No income, no distributions, no tax return.
Here’s a quick breakdown:
| Feature | Active Trust | Non-Active Trust |
|---|---|---|
| Earns income? | Yes | No |
| Distributes money? | Yes | No |
| Files tax returns? | Yes, required | No, if IRD-approved |
If your trust isn’t doing anything taxable, there’s no point in keeping up with unnecessary paperwork.
Benefits of Declaring a Trust as Non-Active
No Annual Tax Returns – The biggest perk! If your trust qualifies, you’re off the hook for yearly tax filing.
Less Compliance Work: No reporting means no stress about meeting tax deadlines.
Lower Costs: No tax return = no accounting fees for compliance.
Simplifies Trust Management: If your trust is holding assets for long-term purposes (like estate planning), this status makes things easier.
Saves Trustees Time: Less admin work for those responsible for managing the trust.
If your trust isn’t making money or distributing funds, non-active status could make life easier. But before you assume you qualify, double-check the rules—because the last thing you want is a surprise from the IRD.
Tax Obligations and Filing Requirements for Non-Active Trusts
So, your trust isn’t earning income—does that mean you can ignore tax completely? Not quite. While a non-active trust has fewer obligations, there are still some important rules to follow. Let’s go over whether you need to file a tax return, what the IRD expects, and the latest updates that might affect trusts in New Zealand.
Does a Non-Active Trust Need to File a Tax Return?
If your trust has been officially recognized as non-active, then no, it doesn’t need to file a tax return. But here’s the catch—you have to apply for this status first. Until the IRD gives the green light, the trust is still considered active, meaning tax returns are required, even if there’s no income.
Once a trust is granted non-active status, it:
✅ No longer needs to file annual tax returns
✅ Is exempt from most reporting requirements
✅ Must remain inactive to keep this status
If the trust later starts earning income or making payments, it immediately loses its non-active status and has to resume tax filings.
Inland Revenue (IRD) Requirements
To register a trust as non-active, the trustees must submit a declaration to the IRD confirming that:
✔️ It doesn’t earn taxable income (rent, dividends, interest, etc.)
✔️ It doesn’t distribute money to beneficiaries
✔️ It only has minor expenses (such as bank fees)
The application is straightforward and is done using the IRD’s Non-Active Trust Declaration Form (IR633). Once approved, the trust is officially non-active, and tax filings are no longer required—unless things change.
📌 What if the trust becomes active again?
If the trust starts earning money or making payments, the IRD must be notified so tax filing can resume. Ignoring this could lead to compliance issues down the road.
Recent Changes in Tax Disclosure Rules for Trusts
In recent years, the IRD has increased trust reporting requirements, particularly for active trusts. While non-active trusts are mostly unaffected, it’s still important to stay informed.
📢 Key updates include:
✔️ More financial reporting for active trusts – Trustees now need to provide additional details about income, distributions, and assets.
✔️ Increased monitoring – The IRD is keeping a closer eye on trust activity, so maintaining non-active status requires staying within the rules.
✔️ Automatic tax adjustments – The system is now better at detecting underpayments and overpayments, meaning any mistake could be flagged faster.
For trusts that don’t meet the non-active criteria, these changes mean more paperwork and stricter compliance.
If your trust qualifies as non-active, it can save you from annual tax filings and unnecessary admin work. But to keep this status, you need to stay within the IRD’s guidelines and notify them if anything changes.
How to Apply for Non-Active Trust Status and Stay Compliant
So, you’ve got a trust that’s just sitting there, doing nothing financially. If you want to stop filing tax returns and reduce compliance headaches, applying for non-active status is the way to go. But before you can officially ditch the paperwork, there are a few steps to follow. Let’s go over what you need to do, the key documents involved, and the mistakes to avoid.
Steps to Qualify as a Non-Active Trust
Before applying, you need to make sure your trust meets the criteria set by the IRD. A trust is considered non-active if:
- It doesn’t earn any income (no rent, dividends, or interest).
- It doesn’t distribute money to beneficiaries.
- It only has minimal expenses, like small bank fees.
- It doesn’t make new investments or financial transactions.
Basically, if your trust is just holding assets but not generating taxable activity, you’re in the clear to apply for non-active status.
Key Documents and Application Process
Once you’ve confirmed that your trust qualifies, it’s time to submit the official application to the IRD. Here’s what you’ll need:
📌 Non-Active Trust Declaration Form (IR633) – This is the main form where you declare that your trust meets the criteria.
📌 Trust Deed (if requested) – The IRD may ask to see the original trust deed to confirm details.
📌 Proof of inactivity – In some cases, you may need to provide additional documents showing that the trust hasn’t earned income or distributed funds.
How to apply:
1️⃣ Complete the IR633 form – This includes basic trust details and confirmation that it qualifies as non-active.
2️⃣ Submit the form to the IRD – You can do this online via myIR or send it by mail.
3️⃣ Wait for approval – If everything checks out, the IRD will confirm the trust’s non-active status, and you’re done!
Once approved, your trust no longer needs to file tax returns unless its status changes.
Common Mistakes to Avoid
Even though the process is simple, some trustees slip up and end up facing compliance issues. Here are some mistakes to watch out for:
🚨 Forgetting to apply – Just because your trust isn’t earning income doesn’t mean it’s automatically non-active. You must submit the IR633 form to make it official.
🚨 Accidentally generating income – If your trust starts earning interest, rent, or any other form of income, it no longer qualifies as non-active—and you’ll need to resume tax filings.
🚨 Not updating the IRD – If the trust’s situation changes, you need to notify the IRD immediately. Ignoring this could lead to penalties or tax issues later on.
🚨 Thinking non-active means dissolved – A non-active trust still legally exists. It just doesn’t have tax obligations. If you want to completely shut down the trust, that’s a different process.
Applying for non-active trust status is a smart way to simplify compliance and avoid unnecessary tax returns. Just make sure your trust genuinely qualifies, submit the right paperwork, and keep the IRD updated if anything changes.
Final Thoughts
If your trust isn’t earning income or making distributions, there’s no reason to deal with unnecessary tax filings. Registering for non-active status can save time, reduce compliance headaches, and cut down on admin costs.
But remember—just because a trust is inactive today doesn’t mean it always will be. Stay on top of any changes, and if your trust starts earning income or making payments, notify the IRD to avoid issues down the road.
By following the right steps, submitting the right paperwork, and keeping the trust within the non-active criteria, you’ll make sure your trust stays compliant while keeping things as simple as possible.
If you think your trust might qualify, why not apply and lighten the load? Less paperwork, more peace of mind. Sounds like a win! 🚀