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Look-through company elections for new companies

LTC (look-through company) elections for new companies, or companies that were previously non-active, for the 2019 income year are due 31 March 2020. However, the Commissioner has extended the deadline by which that election must be received to onor before 30 June 2020.

COV20/01 - Variation to section HB 13(3)(b) of the Income Tax Act 2007

Look-through company elections for existing companies

LTC elections for existing companies, that were previously required to file an income tax return, electing to be a LTC for the 2021 income year are due 31 March 2020. The fully signed and dated election is required before the start of the 2021 income year so for a standard balance date company it was required by 31 March 2020.

However, the Commissioner can accept late LTC elections if there are exceptional circumstances outside the control of the owners and they are signed and dated in the 2021 income year.

For the purposes of LTC elections, the Commissioner considers that COVID-19 is an exceptional circumstance and may allow late elections that are fully signed and dated during the 2021 income year. It is important to note the election must be filed as soon as possible and not left to later in the year merely for convenience.

Look-through company

 

Example: Smith Street Ltd - new companies

Smith Street Ltd is a new company and its shareholders and director intended on electing the company into the LTC regime. This election was due by the 31 March 2020 - the due date of their first income tax return.

However, due to COVID-19 the required LTC election form could not be completed and provided to Inland Revenue until 5 May 2020.

Smith Street Ltd’s tax agent writes to Inland Revenue with details of the exceptional circumstances relating to COVID-19 that prevented the election being made on time. As the election was filed as soon as practicable and before 31 May 2020, the late LTC election is allowed.

Example: Johns Fashion Ltd - existing companies

Johns Fashion Ltd is an existing company that had filed a 2020 IR4 company tax return and its shareholders and director were intending on electing the company into the LTC regime for the 2021 income year. This election was due by the 31 March 2020; the day before the start of the 2021 income year.

However, due to COVID-19 the required LTC election form was unable to be completed but was provided to Inland Revenue on 5 May 2020 which was as soon as possible due to COVID-19.

Johns Fashion Ltd’s tax agent writes to Inland Revenue and provides details of the exceptional circumstances relating to COVID-19 that prevented the election being made on time. As the election was filed as soon as possible, the late LTC election is allowed.