14 Oct 2011

Tax liabilities putting professional trustees off

9:00 am on 14 October 2011

The Institute of Chartered Accountants is warning that lawyers and accountants may be reluctant to act as trustees for their small business clients if the trust runs into financial problems.

Tax director Craig Macalister says IRD can legitimately chase the trustee, because they are also liable for any tax shortfall.

The institute is starting to hear from members facing this issue and Mr Macalister says advisors potentially face tax bills worth hundreds of thousands of dollars, particularly if late payment penalties are included.

Mr Macalister says that may force lawyers and accountants to withdraw from offering these services which could be detrimental to a key relationship between small firms and their key advisors and see clients miss out on professional oversight of their affairs.

He says they may need to take a more hands-on role in trust affairs if they are going to continue to offer the service.

Mr Macalister believes that if lawyers and accountants do withdraw, the gap could be filled by family members or a corporate trustee, who may not have many assets themselves.