Your choices with the new LAQC rules

Question from Lisa updated on 8th March 2011:

Our LAQC is neutral and with the changes to the depreciation rules should we change this entity to a limited liability company or parntership before the new rules apply in April 2011? Does this trigger depreciation clawback? Does it mean you are selling the properties or simply changing the entity?

Our expert Mark Withers responded:

Your company is already a limited liability company. Your choices with the new LAQC rules are as follows.

  • The do nothing default option has your company continuing as a QC that can't attribute losses.
  • The second option would be to revoke your LAQC status and return to being a close company that can't attribute losses and can't distribute tax exempt dividends from capital reserves. 
  • The third option is to elect to migrate your LAQC to become a LTC, this requires profits and losses to be flowed directly to owners and contains a loss limitation restriction. 
  • The fourth option is to elect to transition to become a sole trader, partnership or limited partnership and wind up your laqc within 12 months of the new rules taking effect.

No depreciation recoveries are triggered by this but the process of changing titles and mortgages is costly. Your should now be educating yourself on the suitability of the options you have be speaking one on one to your accountant. 

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.


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