IR3 Question 19 Look-through company (LTC) income

If you received any tax credits and/or income from an LTC write the details at Question 19.

Don’t include:

interest and any RWT—show this at Question 13 and tick 13C
dividends and any credits—show this at Question 14 and tick 14C
Maori authority distributions and credits—show these at Question 15
any overseas income—show this at Question 17, along with qualifying tax credits attached
rental income—show this at Question 22.

The LTC will normally supply information about non-allowable deductions and any other information required to complete your return.

The loss limitation rule limits the amount of deductions an LTC owner (shareholder) can claim if the amount exceeds the owner’s “owner’s basis” (equity) in the LTC.

For the 2018-19 and later income years the loss limitation rule only applies to an LTC which is in a partnership or joint venture which includes another LTC.

For most LTC owners, you can now claim the full amount of your prior years’ non-allowable deductions brought forward this year. This won’t apply if the loss limitation rule continues to apply to limit the amount claimable.

Example

Daniel is an owner of an LTC which is not in a partnership or joint venture that includes another LTC.

For the 2018-19 income year Daniel has a net loss of $7,000.00 from the LTC.

Daniel also has prior years’ non-allowable deductions brought forward of $5,000.00.

Daniel has no tax credits from the LTC for the year.

Daniel’s tax return should show these amounts in the following boxes:

19A: $0.00
19B: $7,000.00-
19C: $0.00
19D: $5,000.00
19E: $12,000.00-

What to show on your return

Add up all other tax credits received from the LTC and print the total in Box 19A.

Add up all LTC income, deduct expenses not already included elsewhere and print in Box 19B. If a loss, put a minus sign in the last box.

Add up all non-allowable deductions this year and print in Box 19C.

There shouldn’t be non-allowable deductions this year unless the loss limitation rule applies.

Add up all prior year non-allowable deductions claimed this year and print in Box 19D.

You’ll be able to claim the full amount of non-allowable deductions brought forward from last year if the loss limitation rule no longer applies.

If you have an amount in Box 19C, add this to Box 19B and put the total in Box 19E.

If you have an amount in Box 19D, subtract this from Box 19B and put the total in Box 19E.

If you don’t have any amounts in Box 19C or Box 19D, copy the amount from Box 19B to 19E.

Box 19E is your adjusted LTC income.

You can find more information about LTCs in our guide Look-through companies (IR879).