The Troubled Teen Years : Is the Repeal of New Zealand’s LAQC Regime Required?

The possible repeal of the Loss Attributing Qualifying Company (LAQC) regime in New Zealand has been raised again. This most recent announcement was canvassed in the discussion document concerning the introduction of a new limited partnership with tax transparency to facilitate venture capital investment. While the repeal of the LAQC regime has not eventuated, this article will argue that the rules for LAQC members utilising allocated losses are inadequate. This means that the LAQCs could compromise the integrity of the New Zealand tax base. Indeed, it will be argued that the loss restriction rules for the new limited partnerships are also inadequate. For both types of tax transparent companies, this article argues for the introduction of a broad loss restriction rule limiting the utilisation of allocated losses to a member’s financial exposure amount. Also, important differences in the governance regimes between the two transparent companies are identified to support the continued availability of LAQCs