TAX TIDBITS
Issue Twenty-Five, July 2008
In this months issue:
LAQC's With Residential Rental Properties
The IRD are currently undertaking a review of all taxpayers who hold residential properties in Loss Attributing Qualifying Companies.
For a number of years the IRD has indicated they believe LAQC’s are being used in situations not intended by the legislation.
The main concern is that people are selling their own home to an LAQC and then renting the home back to themselves.
The individuals are then claiming tax deductions for expenses that would normally be considered private.
The IRD has stated they view this as tax avoidance in most cases.
Currently the IRD are sending out information packs to those LAQC’s that appear to hold residential rental properties, explaining their views.
If you receive an information pack and have any concerns, please feel free to contact your advisor.
Diverting Personal Services Income By Contracting Via An Associated Entity
Recently the IRD have issued an alert in respect of market salaries being paid to working proprietors of service businesses. This is primarily aimed at arrangements where an entity is specifically set up to contract a person's service.
Currently the attribution rules which apply to personal services provided through an interposed entity may require the allocation of income to the individuals who performed the personal services.
There are specific criteria which determine whether the attribution rules apply.
It appears the IRD do not believe that these rules go far enough.
Accordingly the IRD has now indicated where personal services are performed through an interposed entity (e.g. company or partnership), the person performing the services should be paid a market salary.
Most people will be aware of recent tax cases that dealt with market salaries when a trading trust was used. This appears to be another step in the same direction which is clearly aimed at personal services entities which are often set up by people to contract their services through.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
Breakfast Seminar
Are you confused by financial reports? We can fix that at our upcoming seminar Wednesday 27th August 2008 at 9am (2 hours), email Mark at
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under the heading SEMINARS
Disclaimer Information contained within this document is of a general nature and does not constitute advice. Readers are cautioned not to act or reply on it without first seeking professional advice.
