The seminar for LAQC clients, which was previously to be held on 14th October, has been postponed to Wednesday 27th October due to the government's failure to release the final LAQC legislation that has been promised for weeks now.

The Minister of Revenue, Peter Dunne, has released the following media statement which we consider to be very ambiguous, and will be addressed at the seminar.

Minister of Revenue, Peter Dunne said today that the Government would introduce new rules preventing loss attributing qualifying companies (LAQCs) from passing losses on to their shareholders.

The move follows public consultation on proposals for reforms to the tax rules announced in Budget 2010 for qualifying companies and LAQCs.

The new rules will also provide a flow-through income tax treatment for closely held companies who choose to use them. Business income and losses will be able to be passed to shareholders who will pay any tax due, but the rules will allow a business to still have the benefits of a company, such as limited liability.

“In response to feedback from small businesses, the Government has also decided to review the tax rules for dividends, with a view to simplifying them for closely held companies” said Mr Dunne.

Until this review is undertaken, existing qualifying companies and LAQCs can continue to use the current qualifying company rules, but without the ability to attribute losses.

Draft legislation for these changes will be available from Inland Revenue later this week, for feedback.

Mr Dunne said that the draft legislation will allow existing qualifying companies and LAQCs to transition into the new flow-through rules, or change to another business vehicle such as a limited partnership, without a tax cost.

The legislation for the new rules is expected to be enacted before the end of this year and will come into effect from 1 April 2011.

If you were unable to attend the previous date, we would be delighted to see you on the 27th.

Regardless of seminar attendance, we will be issuing clients with an advisory brief as soon as we have had a chance to interpret the new legislation.

If you have previously advised that you could attend on the 14th October, you will have received an email notifying the change. Please RSVP for the new date if you have not already done so, to accountants@wt.co.nz.

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