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Approved Mortgage Brokers - providing a professional New Zealand Mortgage Broker service since 1996. Contact us today.

NZ Home Buyers Guide
Here we look at the types of ownership and what to look for when buying your first home.

Guide to applying for a NZ home loan
This 5 step guide outlines what you will need to prepare and what we will do to assist you with your mortgage application.

NZ Mortgage Repayment Calculator
Calculate your monthly or fortnightly repayments with this mortgage repayment calculator.

Want to buy NZ Property but live Overseas?
At Approved we have many off-shore clients - Expatriate Kiwis and people looking to emigrate or invest in New Zealand.

NZ Bank Fees
Here we look at the various fees associated with mortgage finance.

The Legal Process
See how the legal process works when purchasing a property

Are you Protected?
Approved's Insurance Guide

  Economic Updates
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Saving & Investing
  After being mortgage brokers for many years it becomes apparent that it does not matter what your income is?it's what you do with your income that really counts. Full story...

Why buy NZ Rental Property?
Here we look at the advantages of investing in New Zealand rental property and why the current demand is so high.

Why Have an LAQC as your Investment Vehicle?
If you are investing in rental property in New Zealand you may benefit by setting up a Loss Attributing Qualifying Company.


Resources for Investing and Saving

Why Have a Loss Attributing Qualifying Company (LAQC) as your Investment Vehicle?

A loss attributing qualifying company (LAQC) is simply a normal company that has elected to be an LAQC. LAQC stands for loss attributing qualifying company, which means that the losses your rental property makes are allocated to the individual shareholders to offset against their personal income, thus resulting in a lower provisional liability or a refund of PAYE paid.

With a normal company, if the company were to make a loss, losses can only be offset against future profits. For example, if you make a loss of $10,000 then you must wait until the company has a profit of $10,000 and then you will pay no tax on the $10,000 profit. This can be problematic for rental property investors because, if the property is geared to the maximum and making the full depreciation claims, it may be many years before the company is profitable and can then make use of the tax losses that it has to carry forward.

With an LAQC the larger income earner can own all the shares and have all the losses claimed at the higher tax rate, which may amount to many thousands of dollars in tax refunds. Furthermore, you can sell the shares to a family trust without depreciation clawback (and you don't have the legal fees to change the title of the house).

The Story of Joe Investor

For example, let's take Joe Investor Joe has a salary of $80,000 and has paid tax via PAYE on this income. Now if Joe has several rental properties and makes a loss of say $20,000 then Joe should not have paid tax on $80,000 he should have only paid tax on $60,000; therefore Joe receives all of the tax he paid on his income between $60,000 and $80,000. Since anyone earning $60,000 plus is taxed at 39%, Joe will receive a refund of $7,800. If Joe had his investment properties in either a family trust or a company that was not an LAQC, Joe would have to wait until the entity became profitable before receiving any tax relief.

IRD Criteria for becoming an LAQC (summarised):

  • Must not be a foreign company;
  • Must have fewer than 5 shareholders;
  • All shareholders and directors must have elected that the company become an LAQC and not have revoked this status;
  • The directors must have elected to become personally liable for their share of any income tax not paid by the company (herein lies quite a big difference between regular companies and LAQC's);
  • All shares in the company must carry the same rights

LAQC or family trust?

Transferring your assets to a family trust means you don't own the assets anymore, the family trust does - this is important to protect your assets. The taxation issue for losses in a family trust works in a similar way to losses in a regular (non-LAQC) company, the losses can only carried forward and offset against future income rather than receiving immediate taxation relief.

The family trust is still a good ownership vehicle if you are buying highly positively geared properties that will either not make a loss or will make very minimal losses prior to becoming profitable.

How do I elect for the company to become an LAQC?

Either go to your accountant who will arrange this for a small fee or go to http://www.ird.govt.nz/forms-guides/number/forms-400-499/ir436-form-qualifying-laqc.html for the application form.

See also: Investing in Rental Property

Are you looking to arrange a NZ home loan? Tell us about your circumstances with our brief questionaire and we will email you back within 48 hours with a confidential appraisal. Apply here

What do I need to do to apply for a NZ home loan? You will need to prepare the right documentation before meeting with your NZ Mortgage Broker. Here's what you will need.

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