Qualifying companies transitioning to look-through company rules

2011 legislation amends the transitional rules for a qualifying company or loss-attributing qualifying company transitioning to a look-through company.

Section HZ 4C of the Income Tax Act 2007

The legislation introduces an amendment to the transitional rules for a qualifying company (QC) or a loss-attributing qualifying company (LAQC) which is transitioning to become a look-through company (LTC).

Background

When the new LTC rules were introduced, transitional rules were included to provide a smooth transition for existing QCs and LAQCs wanting to become LTCs.

Key features

Section HZ 4C has been amended to clarify that when a QC or LAQC uses the transitional rules and becomes an LTC, any elections and valuation methods it previously adopted (for example, depreciable property or livestock valuation elections) will carry over to the LTC. The LTC does not have to re-establish these elections.

Application date

The amendment applies from 1 April 2011, when the LTC rules came into effect.