Look Through Company (LTC) NZ Guide 2026

Updated August 2026 - current LTC rules checked against Inland Revenue guidance.

Quick answer

A look through company, or LTC, is a New Zealand company that is "looked through" for income tax. The company still exists legally, but its income, expenses, tax credits, profits, and losses are generally attributed to the owners.

That means the owners usually pay tax personally on their share of LTC profit, instead of the company paying tax at the standard 28% company rate.

An LTC can be useful, but it is not a shortcut around every tax rule. Ownership, elections, rental loss ring-fencing, share sales, and exit rules all matter.

What is a look through company?

An LTC starts as an ordinary company registered with the Companies Office. The difference is tax treatment.

For legal purposes, it is still a company. It can own assets, enter contracts, borrow money, and limit shareholder liability in the normal company-law way.

For income tax, Inland Revenue looks through the company to the owners. Each owner is treated as having their share of the LTC's income and deductions.

Simple example: an LTC earns $80,000 profit and has two equal owners. Each owner generally includes $40,000 in their own tax return and pays tax at their own marginal rate.

Who can use an LTC?

An LTC is only available where the company meets the rules. The main requirements are:

• The company must be a New Zealand tax resident and not treated as non-resident under a double tax agreement.
• It must have 5 or fewer look-through counted owners. Related owners may count as one owner in some cases.
• Owners are usually natural persons or trustees. A normal company cannot usually own shares in an LTC, although one LTC can own another LTC.
• Tax charities and Maori authorities are generally not allowed, unless old grandparenting rules apply.
• Foreign ownership and foreign income can trigger extra restrictions.
• The company must keep meeting the rules each income year.

If the company stops meeting the rules, it can lose LTC status and be treated as an ordinary company again.

How to become an LTC

The company needs to file an IR862 look through company election with Inland Revenue. Every owner must sign the election.

If the company is non-active, it may also need to file an IR434 non-active company declaration.

Timing matters. The election needs to be made for the income year you want LTC treatment to apply from. If an LTC later revokes or loses its status, it generally cannot elect back into LTC treatment for the year it stopped and the next two income years.

How LTC tax works

An LTC files income tax returns like a company, but the tax result flows through to the owners.

In a simple case, each owner's share follows their ownership interest. If ownership changes during the year, the allocation can get more technical.

The loss trap

This is where LTCs are often misunderstood.

IRD guidance says owners can offset LTC losses against other income. But that does not mean every loss can always reduce salary or wages.

For residential rental property, ring-fencing can still apply. If an LTC owns residential rental property and the rental makes a loss, that loss may need to be carried forward against future residential rental income instead of reducing the owner's salary tax.

So an LTC does not automatically bypass rental loss ring-fencing.

Losses can also be affected by ownership changes, exit rules, and whether the owner still has an interest in the LTC. If the main reason for using an LTC is losses, get advice before relying on the structure.

Entry, exit, and share sales

Changing into or out of LTC status can create tax consequences.

An existing company that becomes an LTC may have calculations to do for the transition year. If an LTC stops meeting the rules, the loss of LTC status can be backdated to the start of the income year.

Selling LTC shares can also trigger tax calculations, especially where the sale price is more than the seller's share of the company's net book value. This is one of the areas where accountant input is usually worth the cost.

LTC vs ordinary company vs sole trader

If you are comparing structures, start with sole trader vs company in NZ, then use the company tax calculator to model retained profit.

LTC vs trust

An LTC and a trust solve different problems.

An LTC is mainly a tax-transparent company structure. A trust is mainly used for ownership, succession, estate planning, and asset protection goals.

From a tax angle, trusts can also be less simple than they used to be because the trustee tax rate is 39% in many cases. But tax rate alone should not decide the structure. The real question is what you need the structure to do.

Read the TaxPop trust tax guide if you are comparing trust and company structures.

When an LTC may make sense

An LTC may be worth discussing with an accountant if:

• You want a company structure, but owner-level tax treatment matters.
• There are only a small number of owners.
• The owners are individuals or trustees who can meet the eligibility rules.
• The business is not mainly about retaining profit inside the company.
• You understand how losses, rental rules, and ownership changes will be treated.

When an LTC may not make sense

An LTC may be a poor fit if:

• You want profits to stay in the company and be taxed at 28%.
• Ownership may change often.
• There are ordinary company shareholders.
• There is significant non-resident ownership or overseas income.
• You are using it only because you think losses will always reduce personal tax.
• You want the simplest possible structure.

Practical next steps

• Compare the structure against a normal company using the company tax calculator.
• If you are currently a sole trader, read sole trader vs company in NZ.
• If the LTC owns rental property, estimate the numbers with the rental income calculator and remember ring-fencing may still apply.
• If dividends or company profit retention matter, read the imputation credits guide.

Bottom line

An LTC can be useful when you want a company legally but want income tax to flow through to the owners. It is most useful for small, closely held structures where everyone understands the owner-level tax result.

It is not a magic tax-saving structure. The key questions are eligibility, what happens to losses, whether profits will be retained, and what happens when owners enter or leave.

General information only - LTC rules checked against IRD look through company guidance.