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Tax Talk - Major changes to LTC regime proposed

From 1 April 2017, there are to be major changes/improvements to the LTC regime including:

  • When a beneficiary of a trust owning shares in an LTC gets a distribution, this gives rise to an additional person in the number of owners test. 3 years is to become 6.
  • Losing LTC status if a trust shareholder makes a distribution to a company.
  • Charities and Maori authorities cannot be shareholders in LTCs.
  • Can have more than 1 class of shares and different voting rights.
  • Foreign income when more than 50% of LTC shares held by non resident limited to greater of 20% or $10000.
  • Get rid of loss limitation rule except where there are partnerships of LTCs. ? Deductions carried forward are to be claimable in 2018 year.
  • Anti avoidance S GB 50 dealing with transactions with shareholders at less than market value to apply.
  • No debt remission income if debt to shareholder cannot be repaid by LTC.
  • No more transferring a company to LTC and dodging the extra dividend withholding tax.