free advice > LAQCs and the new Look Through Companies
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LAQCs and the new Look Through CompaniesLAQCs and the new Look Through CompaniesOn 20 December 2010, Parliament enacted legislation repealing the loss-attributing qualifying company (LAQC) rules. The Government will effectively abolish the LAQC rules from 1 April 2011. If no action is taken, LAQCs will simply become qualifying companies (QC) by default. QCs have the same characteristics as LAQCs but without the ability to attribute losses to shareholders. A new vehicle called a Look Through Company (LTC) is being introduced. A LTC will be treated like a partnership for tax purposes, with all income, expenses, tax credits, gains and losses allocated to shareholders (subject to certain loss limitation provisions). A LTC will provide the benefits of a corporate structure in terms of limited liability but with the tax characteristics of direct ownership (similar to the current LAQC treatment). A transitional period will allow shareholders of an existing LAQC to move to a new structure without incurring any tax costs. This provides a one-off opportunity to alter your current structure without tax cost, and in some situations it can result in permanent tax savings. Shareholders of a LAQC will be able to choose: - Continue to be a QC (without loss attribution) or - Transition to:
Once the transitional period has expired, any change in the ownership structure may cause an unfavourable tax position, such as, by triggering deprecation recovered, or forfeiting accumulated losses. A one-size does not fit all and as such we will be reviewing your situation on a case-by-case basis. Your situation will determine which structure will provide you with the best tax position. We will be contacting you individually to discuss your requirements and ascertain your future plans with your current LAQCs to establish the optimal restructure for your company. If you have any immediate concerns, please do contact us to discuss further. |
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11 Longley Place, Christchurch, New Zealand Ph. +64 03 339 7260 Fax. +64 03 339 7269 Email. info@balanceaccounting.co.nz |
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