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Transitions from qualifying company/loss attributing qualifying company to look-through company

The qualifying company (QC) rules changed from the income year beginning on or after 1 April 2011. There was a transitional process in place so that existing qualifying company/loss attributing qualifying companies (QC/LAQC) could transition into an LTC with no tax cost if they did it during the transitional period.

The transitional period

The transitional period covered the first and second income year starting on or after 1 April 2011. For a company with:

  • a standard or late balance date this was the 2012 and 2013 income years
  • an early balance date this was the 2013 and 2014 income years.

Companies can no longer transition to an LTC using the transitional rules.


QCs/LAQCs could also transition to a sole trader or partnership. This was a deemed revocation of the QC/LAQC election.

If the transition was not completed QC status was lost and the company reverted to a close company. Transitions had to occur within the chosen income year with all assets transferred to the new entity.

This option is no longer available to existing QCs.

Find out more about changes to the qualifying company rules and introduction of look-through company rules

Transitioning a QC or a LAQC into an LTC

Transitioning from a QC or a LAQC to an LTC had the following results:

Company treated as an LTC

The company is treated as if it were an LTC from the start of the transitional year.

QC or LAQC status is revoked

Electing to become an LTC revoked the QC or LAQC status from the start of the transitional year. If the LTC election is later revoked, the company becomes a close company and can't go back to being a QC company.

Corporate identity and tax history of the previous QC or LAQC retained

The LTC retained the same corporate identity and tax history of the previous QC or LAQC. Other tax registrations (such as for GST, PAYE, FBT) were carried over automatically from the QC or LAQC to the LTC. Any tax arrears were also carried over to the new LTC.

Loss balance carried forward

Any loss balance carried forward from a QC may be used by the owners of the LTC in future years against their share of income from that LTC.

Find out about company losses incurred before becoming an LTC

First year income calculation

Owners did not need to complete a first year income calculation for the year the company became a LTC.

Find out more about tax in the first year for LTC owners

See also