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HB 12: Limitation on deductions by owners of look-through companies: carry-forward
or “Carrying forward unclaimed deductions for look-through company owners”
You could also call this:

“How to choose for your company to become a look-through company for tax purposes”

When you want to become a look-through company (LTC), you need to make an LTC election. This is like telling the government that you want your company to be treated in a special way for tax purposes. Here’s what you need to know:

You need to fill out a special form that the Commissioner gives you. A director or someone in charge of your company needs to sign and date this form.

You also need to choose which year you want this to start. It has to be a year that begins on or after 1 April 2011.

Everyone who owns a part of your company (called a look-through interest) needs to agree to this. They need to sign and date a notice saying they agree. If someone who owns a part is under 18 or can’t make decisions for themselves, their guardian or legal representative can sign for them.

You need to send this form to the Commissioner before the year you want it to start. But if your company is new and hasn’t had to file a tax return before, you can send it by the day your first tax return is due.

Once you’ve sent in your election, it will work for that year and future years. But it might stop working if you cancel it, if your company stops meeting the rules to be an LTC, or if you’ve stopped being an LTC for two years.

If you’re late sending in your form or if not everyone has signed it, the Commissioner might still accept it if there’s a really good reason why you couldn’t do it on time.

When your company becomes an LTC, it keeps all the same stuff it had before - like its assets, debts, and legal rights and duties.

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Part H Taxation of certain entities
Look-through companies

HB 13LTC elections

  1. For the purposes of section HB 1, an LTC election (the election) is a notice that—

  2. is signed and dated by a director of the company that becomes a look-through company (the LTC) or other agent with appropriate authority; and
    1. is in the form prescribed by the Commissioner; and
      1. specifies an income year beginning on or after 1 April 2011 for which it may first operate; and
        1. has attached to it notices—
          1. signed and dated by all persons who, on the date of signing the election, own look-through interests in the LTC; and
            1. evidence unanimous agreement of the owners in choosing to apply section HB 1.

            2. If a person owns a look-through interest in the LTC, and either they are under 18 years old with a guardian or a contract they enter into could be unenforceable, cancelled, void, or voidable due to any legal incapacity other than age, the notice requirement in subsection (1)(d) is modified so as to require a guardian, person with power of attorney, or other legal representative to sign and date the notice, instead of the person.

            3. For the purposes of section HB 1, the election—

            4. must be received by the Commissioner before the start of the income year specified in the election; or
              1. in the case of a company that has not previously been required to file a return of income for a year before the income year specified in the election, must be received by the Commissioner on or before the last day for filing the return of income required by section 42B of the Tax Administration Act 1994 for the year specified in the election; or
                1. in the case of a company that was a qualifying company that first becomes a look-through company for the first or second income year that starts on or after 1 April 2011, must be received by the Commissioner within 6 months of the start of the relevant transitional income year described in section HZ 4C(1) (Qualifying companies: transition into look-through companies).

                  1. For the purposes of section HB 1, the election is treated as received for the first relevant income year described in subsection (3) and for each income year after that one, except it is treated as not received by the Commissioner for an income year (the income year) and subsequent income years if—

                  2. the election has been revoked for the income year under section HB 1:
                    1. the LTC does not meet the requirements in the definition of look-through company at all times in the income year:
                      1. the income year is 1 of the 2 income years straight after an income year for which either the LTC ceases to be a look-through company or the relevant election for the LTC is revoked.

                        1. An election that is late or does not have each person signing and dating as required by subsection (1)(a) and (d) is treated as an election that has been received by the Commissioner for the income year under subsection (3) but subject to subsection (4), if all relevant persons sign and date it during the income year it may first operate, and the Commissioner decides that exceptional circumstances are the sole cause of the lateness or failure to sign and date.

                        2. An entity that ceases to be a company upon becoming an LTC is treated as having, as an LTC, the same status, intention, purpose, and tax book timings and values it had as a company for its assets, liabilities, and associated legal rights and obligations.

                        Notes
                        • Section HB 13: inserted, on (applying for income years beginning on or after 1 April 2011, and for the purposes of the Commissioner receiving LTC elections, on and after 21 December 2010), by section 78(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section HB 13(2): amended, on , by section 48 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                        • Section HB 13(3)(b): amended (with effect on 1 April 2011), on , by section 86(1) (and see section 86(2) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                        • Section HB 13(5): amended (with effect on 1 April 2011), on , by section 81 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section HB 13(6) heading: inserted (with effect on 1 April 2011), on , by section 132 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                        • Section HB 13(6): inserted (with effect on 1 April 2011), on , by section 132 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                        • Section HB 13(6): amended (with effect on 1 April 2011), on , by section 76 of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).