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LAQC changes confirmed

Proposed new rules confirmed today as part of the wider tax shake-up will eliminate landlords’ and businesses’ ability to claim depreciation on buildings and tighten the rules for LAQCs.

Tuesday, December 7th 2010, 12:00AM

by The Landlord

Announcing the new measures Finance Minister Bill English said, "These changes will reduce the opportunities for well-off people to structure their affairs for tax purposes."

"Changes to the treatment of QCs and LAQCs will ensure that owners cannot claim a tax deduction on losses at a higher rate than they pay on profits."

The new measures are outlined in a Supplementary Order Paper (SOP) that will introduce several Budget 2010 tax measures to the Taxation (GST and Remedial Matters) Bill, which is nearing its final stages in Parliament.

According to WHK tax principle Scott Mason there is little that is new in the document.

"From a policy perspective, little has changed," he said.

Withers Tsang co-founder Mark Withers also found nothing new in the SOP other than "confirmation they're going to enact those [earlier flagged] changes."

He said that nothing in the new release came as a surprise, and that chartered accountants have already been working with property investors ahead of the law changes.

The proposed changes have been finalised after public consultation and will include measures to close loopholes in the tax treatment of loss attributing qualifying companies (LAQCs).

They will also tighten the rules to prevent shareholders from deducting losses at their marginal tax rate and paying tax on profits at the lower company rate.

It will also end landlords' and businesses' ability to claim depreciation on buildings with an estimated useful life of 50 years or more.

New tax rules will also be put in place to ensure people can still claim accelerated depreciation on the fit-out of commercial and industrial buildings, as well as depreciation loading on assets where investment decisions were made before May 20, 2010, but not finalised until sometime after.

Mason believes that "without doubt" the new measures will impact on property investors, with the new tax regime effectively spelling the end for LAQCs.

He believes the majority of property investors will shift from LAQCs to Qualifying Companies (QCs), a structure that "still has an advantage" for the investor as capital gains can be distributed tax free.

Revenue Minister Peter Dunne said, "Since Budget night there has been considerable consultation on the implementation details of the tax measures announced and I believe the changes outlined today are a fair and pragmatic response."

 

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 4.94 - - -
AIA - Go Home Loans 7.49 ▼5.79 ▼5.49 ▼5.59
ANZ 7.39 6.39 6.19 6.19
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.79 5.59 5.59
ASB Bank 7.39 ▼5.79 ▼5.49 ▼5.59
ASB Better Homes Top Up - - - 1.00
Avanti Finance ▼7.90 - - -
Basecorp Finance ▼8.35 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.54 - - -
BNZ - Rapid Repay 7.54 - - -
BNZ - Std 7.44 ▼5.79 ▼5.59 5.69
BNZ - TotalMoney 7.54 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - ▼5.69 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 6.95 ▼5.79 ▼5.59 5.69
Co-operative Bank - Standard 6.95 ▼6.29 ▼6.09 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - ▼5.99 ▼5.89 -
First Credit Union Standard ▼7.69 ▼6.69 ▼6.39 -
Heartland Bank - Online ▼6.99 ▼5.49 ▼5.39 ▼5.45
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.60 6.65 6.40 -
ICBC 7.49 ▼5.79 ▼5.59 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.25 6.89 6.59 6.49
Kiwibank - Offset 7.25 - - -
Kiwibank Special 7.25 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society ▼7.94 5.95 6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank ▼7.49 6.95 6.29 6.29
SBS Bank Special - 6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo ▼4.94 5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.19 6.49 ▼6.39 ▼6.39
TSB Special 7.39 5.69 ▼5.59 ▼5.59
Unity 7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.10 6.05 5.79 -
Westpac 7.39 6.39 6.09 6.19
Westpac Choices Everyday 7.49 - - -
Westpac Offset 7.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 5.79 5.49 5.59
Median 7.49 5.99 5.79 5.69

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