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Articles by Matthew Gilligan

Don't Miss The Boat

AUTHOR: Matthew Gilligan

POSTED: 08 May 2011

The 2012 tax year began on 1 April 2011 for most taxpayers and with it new tax rules in relation depreciation on buildings and LAQCs finally came into force. We have written a number of times on the potential impact these rules may have on you if you have an existing LAQC and have long been encouraging our clients to make contact with us in order to have their circumstances reviewed so that appropriate action can be taken.

If you have an LAQC and have not yet obtained advice in relation to the impact of the new rules on you it is not too late but time is running out. Contact us at GRA for a meeting immediately.

By way of summary, the key changes are as follows:

Tax losses of an LAQC can no longer be attributed to shareholders. This means if you have a loss making LAQC from the 2012 year onwards you will no longer be able to personally claim the tax losses produced by the LAQC. If you are in this situation you need to take action.

Whilst LAQCs can continue to exist without the ability to attribute losses, no new companies can enter the LAQC or QC regime.

In what can be regarded as a replacement of the LAQC regime the new Look Through Company (LTC) regime has been enacted. An LTC is perhaps best described as a “cousin” of an LAQC.

LTCs share some characteristics of the old LAQC regime in that tax losses can be attributed to shareholders and capital gains can be released from an LTC.

However, there are some significant differences including the fact that there are rules that effectively limit the amount of loss that shareholders can claim, profits are also attributed to shareholders rather than being regarded as company profits, shareholder salaries can not be paid from LTCs, and shareholders are regarded as owning the underlying assets for tax purposes, which means when you sell shares in an LTC you are regarded as selling the property which can have income tax implications for you if the LTC owns property that is on revenue account or depreciable property.

There are a variety of options available to those who have LAQCs and we also see the new LTC rules as offering opportunities for clients with existing companies and offshore operations in certain circumstances. Please contact us at GRA for a meeting to discuss the potential opportunities that the new LTC regime presents.

Request a Meeting

Matthew Gilligan
Director

09 522-7955

mg@gra.co.nz

© Gilligan Rowe & Associates LP

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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.

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Testimonials

This letter is to express my appreciation for the assistance and encouragement of both Anthony Lipscombe and particularly John Heaslip over the last financial year. The period since activating my trading trust has been one of considerable stress, as well as personal development, as I embarked on this as a relative business neophyte with virtually no awareness of the contemporary requirements of running a business, particularly the financial records aspect. During much of this period I have therefore felt considerable out of my depth. However I have been lucky enough to have had the benefit of the advice and support of John Heaslip in rationalizing what was a fairly chaotic set of records of the first year property trading. I am able to say that John in particular, has been unstinting in his attention to my needs and has done so in a manner which has never alluded to my extremely rudimentary grasp of managing a business, or even of being unable to set out a spread sheet properly. The result of the above guidance is that now, although my trading trust would still not be able to operate without the advice of GRA, I do least feel a sense of satisfaction that I have got to my present point without major disaster and that my property trust does now have some kind of firmer basis for any future activities - Name withheld by request

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