Revenue Minister Peter Dunne is being urged to make a clear ruling when he announces the new rules surrounding the use of loss attributing qualifying companies, or LAQCs.
LAQCs are used by thousands of New Zealand property investors as a way of passing losses from the companies on to their shareholders, something the Government is keen to stop.
WHK tax partner Jarod Chisholm said yesterday Mr Dunne had indicated on Monday that changes would be released later this week.
It appeared the qualifying company and LAQC regime would be phased out and new rules introduced to allow flow-through tax treatment for closely-held companies.
It seemed the position of the regime would not be clear until the review of the tax treatment of dividends was completed, he said.
"The comments indicate that LAQCs will be able to operate under the existing rules but without the ability to attribute losses.
"For existing LAQCs, the trick will be to determine if the potential tax cost of altering their structure prior to the introduction of the transitional rules outweighs the benefit of the loss being attributed to shareholders."
Many taxpayers would need to come to terms with the new rules and determine the most appropriate business structure for the future, Mr Chisholm said.
Between 40,000 and 80,000 qualifying companies would be affected by the rule change.
Mr Chisholm was concerned Mr Dunne would not be clear enough about the rules.
Taxpayers could at present use interest payments and the cost of the property to create losses and receive tax refunds to fund the property purchase.
"When those rules stop, taxpayers will have to react. There has to be enough certainty in the legislation to enable taxpayers to make proper business decisions," he said.
