LAQC and QC Budget Changes


What is changing?

* Qualifying companies (QCs) and loss attributing qualifying companies (LAQCs) will become flow-through entities for tax purposes – similar to limited partnerships.
* Inland Revenue and Treasury are releasing an issues paper today on the implementation of the new rules.
* Changes will take effect from income years starting on or after 1 April 2011. Legislation implementing these changes will be enacted later this year.


* Under the current rules, people can choose to deduct losses at their marginal tax rate – as high as 38 per cent – but have their profits taxed at the lower company rate (currently 30 per cent).
* Changing the rules will improve the integrity and fairness of the tax system.

Key facts
* The changes will affect only shareholders of QCs and LAQCs.
* In recent years, LAQCs have become more popular and they are a common structure used by property investors. Between 2003 and 2007 – during the housing boom – the number of active LAQCs doubled and the average tax loss claimed by investors increased by almost 50 per cent.
* The changes are expected to generate additional revenue of $70 million in 2011/12, falling to $55 million a year by 2013/14.

More information
* The issues paper on the implementation of the changes to the QC and LAQC rules will be available on Inland Revenue’s Policy Advice Division website at

Media Release from Hon Bill English, Minister of Finance.