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Loss Attributing Qualifying Companies
Rajnesh Chand of ABC Business Solutions Limited writes:
If you own or are thinking of buying an investment property which is negatively geared ie. The cost of interest and depreciation on the property is more then the rental income generated, the loss can be offset against your personal non rental income. The body which can be used to pass on this loss, is called a Loss Attributing Qualifying Company.
A loss attributing qualifying company (LAQC) is a company that has elected to be an LAQC. With an LAQC, the losses your rental property makes are allocated to the individual shareholders to offset against their personal income, thus resulting in a lower tax liability or a refund of PAYE paid.
Generally with a normal company, if the company were to make a loss, losses can only be offset against future profits. For example, if the company makes a loss of $5,000 then you must wait until the company has a profit of $5,000 and before the profit can be offset against the loss. However, if the property is geared to the maximum and claiming the full depreciation on the building and chattels, it possibly will be many years before the company is profitable and can then make use of the tax losses that it has to carry forward.
With an LAQC, it is possible for the larger income earner to own all the shares and have all the losses claimed at the higher tax. Also with a LAQC the shares in the company can be sold / transferred without any depreciation recovery.
For further information you should contact your accountant, or an accountant on our Quick Contact Guide. |
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