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Company losses incurred before becoming a look-through company

When a company becomes a look-through-company (LTC), any losses carried forward from the company’s previous income years are cancelled and can't be carried forward. These losses can't be used by the LTC and are no longer available to the company.

The only exception is for companies that transitioned from a qualifying company/loss attributing qualifying company (QC/LAQC) into an LTC in one of the first two transitional years.

Note

There were special rules in the first or second income year following 1 April 2011 where an existing QC/LAQC could have transitioned to an LTC. This option is no longer available to existing qualifying companies (QCs).

If a QC/LAQC transitioned to a LTC

If a QC/LAQC transitioned into an LTC, its losses were still cancelled. However, owners are able to claim a deduction for these losses against their net income.

The LTC records the cancelled loss each year in a Partnerships and look-through companies (LTCs) income tax return (IR7) as an extinguished loss. The LTC also accounts for all earlier year deductions, and deductions claimed in the year of the return until all the extinguished loss is used. Each owner would be able to claim their proportion of the loss as a deduction from their LTC net income based on their percentage of shares.

The owner does not need to be one of the original shareholders who elected to become an LTC to claim a deduction.

The Partnership and look-through company (LTC) return (IR7G) guide and the Look-through company (IR879) guide has information on how to account for extinguished losses.

See also