The closely-held company reforms will be introduced progressively, starting with the removal of flow through of losses for loss attributing qualifying companies.
Taxpayers will also be given a window in which to decide which structure will best meet their needs.
An interesting development is the Look Through Company (LTC), a tax transparent entity which will offer most of the tax benefits of a limited partnership, but using a company structure.
Other changes on the way
The Government has also signalled an intention to conduct a wide ranging review of the tax treatment of dividends for closely-held companies. The indications are that this review will be extensive. We do not expect the resulting changes to take effect prior to the 2012 tax year.
We are concerned that these changes are being introduced in a piecemeal manner. Taxpayers will be required to select an entity type without full knowledge of the downstream consequences of such choices.
KPMG will provide further clarity when the final form of the changes is known.
If you have any questions on the above, please speak to your usual KPMG advisor or contact: