Look Through Companies

Question 1

What is an LTC?

Answer 1

Effectively a company taxed as a partnership.

Question 2

What are the requirements of an LTC?

Answer 2

• NZ resident only
• < 5 counted owners
• All shares have same rights
• no distributions to companies, Maori authority, or charity

Question 3

What is a counted owner?

Answer 3

• A natural person with LTC interest
• A beneficiary that received distributions in any of the last 3 years
• Trustee with interest in LTC and no beneficiary is a look through counted owner

Question 4

How are associated persons treated as counted?

Answer 4

Natural persons that are relatives will be treated as 1 person
Trustees of the same trust
LTC that is an SH of another LTC

Question 5

Who are relatives?

Answer 5

Married, civil union, defacto

Within 2 degrees of blood relation of person or spouse

Question 6

How is LTC created?

Answer 6

All owners/directors agree,
All tax losses are extinguishes
Untaxed reserves treated as paid to owners

Question 7

LTC Entry dividend formula

Answer 7

((Dividends - assessable income) + reserved IC) x Effective interest

Question 8

When is LTC revoked?

Answer 8

Only requires 1 owner to revoke
OR
Breach eligibility criteria

Question 9

When is revocation effective?

Answer 9

Start of the income year
Sold back at MV
- Potentially Assessable income