Partnership Tax Return
Is your business structured as a partnership? There are obligations you need to meet.
A Tax Return must be lodged for the partnership and each partner must also submit an Individual Tax Return. This allows business expenses and deductions to be separated from personal finances.
Some deductions may not be available to the partnership however they may be claimed by individual partners in their return.
You need to take the following steps:
- Lodge a partnership Tax Return to report the net income. This takes all assessable income into account minus allowable expenses and deductions.
- Lodge individual Tax Returns for each partner.
- Each partner pays tax on a share of the net partnership income as the partnership itself does not pay Income Tax.
On your individual Tax Return you need to report:
- Your share of any partnership net income or loss
- Other assessable income you have earned such as salary / wages, dividends or income from rental properties
- Your salary / wages must be shown on a payment summary
The Tax Focus team assists you in making sure your partnership Tax Returns are compliant with all ATO regulations. We help you avoid any complications with the ATO, ensure our advice is personalised to your specific situation and provide advice to reduce your Tax obligations.
Deciding on a partnership.
You need to take care when considering a partnership. This business structure is common for small businesses in Australia and there are many advantages for the partners involved. However, the structure is not perfect for every business collaboration. The Tax implications can become complicated.
Discuss your options with Tax Focus before entering into any partnership agreement. We will go over all the details so you can decide if it is the best business structure for you. The services offered to partnerships by Tax Focus include:
- Tax Return preparation
- Accounting and bookkeeping
- BAS preparation and lodgement
- Tax advise
- Partnership set up
Do not miss any details.
All income earned and all deductible expenses for the partnership must be declared in the partnership Tax Return. You must detail how the net income or loss will be distributed between the partners.
Each partner’s individual Tax Return must declare their share of the net income or loss from the partnership. This must be completed whether each partner has in fact received income from the partnership.
Each partner owns a proportion of every Capital Gains Tax asset and your Tax Return must include your calculation of the capital gain or capital loss from your share of each asset. The partnership Tax Return does not include the capital gain or loss from each item.
Your partnership structure.
There are several features of a business partnership structure:
- The partners share the income, losses and control of the business
- The partnership has its own Tax File Number and an annual partnership Tax Return must be lodged under this TFN showing all the business income and deductions
- Each partner pays Income Tax on their share of the profits they receive. The partnership does not pay Tax on the profits earned
- The partnership has its own ABN
- If the annual turnover of the partnership is $75,000 or more, the business must be registered for GST.
If you have any questions about partnership agreements and the Tax implications, please give us a call on (02) 9416 7600.