LTCs / Look Through Companies: The New LAQC

[CJ]

Drelly - my reference to continuing with a trust was in relation to asset protection etc, not the decision in relation to your LAQC. I still might not be clear but we are on the same page.

Re going from a LAQC to an ordinary company, consider just going to a QC (default option if you do nothing). same benefits of a company you refer to above but also enables you to distribute capital gains tax free (ie. unimputed dividends from a QC are exempt). This will maintain a bit more flexibility over the next few years till they repeal the QC rules (which may be done once they have reviewed the dividend rules).

[foss]

Hi CJ

Have been watching this thread with interest. i'm currently pondering what sounds like similar situation to Drelly. i have existing trust plus profitable LAQC (with building depn gone).

i'm considering merits of swapping to LTC 100% owned by Trust which mildly benefits asset protection + capital distributions, else changing to QC as you suggest. I'm a little worried what might happen to trusts in future, mainly on tax side. They seem to be the next ogre in the gun.

QC offers added benefit of 28c tax rate. With QC though thinking of keeping share ownership as 50/50 hub/wife. If they changed the distribution rules later, might be benefit for shareholding to be 98/1/1 in favour of trust? Can I change QC shareholding if need be in 2011/12 tax year without penalty to 98/1/1 if need to?

I must admit I'm mindful that QC's will disapppear, then stuck with a normal coy and won't be able to distribute capital gains (which is benefit of LTC)

There are trade-offs to the decision.

[CJ]

With QC's you will continue to be able to change shareholders with no tax consequenses (provided elections are made) until an announcement that you can no long do such a thing. Any change to QC is likely to come with a change to the dividend rules.

[foss]

thanks CJ, that's what i thought. QC sounds better option me-thinks

Just to get all the facts clear - presumably there is a cost (like an entry tax, similar to QC's) to becoming a LTC later on if we don't elect in the coming transition period and decide in 2-3 yrs?

[CJ]

Just to get all the facts clear - presumably there is a cost (like an entry tax, similar to QC's) to becoming a LTC later on if we don't elect in the coming transition period and decide in 2-3 yrs?

Correct - similar to existing QCET.
Essentially, any losses carried forward will be forfeited and any unimputed retained earnings (ie. if you dont have enough IC to pay out your RE in full - normally due to capital gains) will be subject to entry tax at owners marginal tax rate (not sure on rate?). This is a simplification but should be true in 90%+ of cases.