How To Lodge Partnerships Tax Return In Australia?

March 24, 2022    Taxagent Perth

A partnership is a business structure consisting of two or more people. Who distribute the net income or losses among themselves. During the tax season, a partnership needs to file a tax return separately apart from each individual in the partnership.

If you want to lodge a Partnerships Tax Return for your partnership. It is recommended you get in touch with tax agents to help you with all the complexities of Australian tax returns.

Now let’s understand all about partnership and lodging partnerships tax return in Australia.

Understanding The Partnership Structure

There are various features of a partnership structure. Some are as follows:

  • the partners share the profits, losses and have control over the business
  • the partnership has its own TFN, and a yearly tax return must be filed under this TFN declaring all the income and deductions
  • each partner has to pay income tax on the profit share they receive as the partnership does not pay any income tax
  • the partnership has a separate ABN
  • if the partnership’s annual turnover is $75,000 or more, it has to be registered for GST.

Read More:- Small Business Tax Tips 2022 To Save Money And Time

Understanding Partnership Tax Return

A business partnership in Australia has its own TFN (Tax File Number) but does not have to pay any income tax on the profit it earns. Rather, each partner pays tax on their individual share of the net income the partnership earns.

However, a separate tax return needs to be lodged for the partnership. And each partner must also lodge their tax returns declaring their share of profit or loss in the partnership. It allows the business deductions and expenses to be separated from the personal finances. Some deductions may be unavailable to the partnership. But they can be claimed by the individual partners in their respective tax returns.

The declaration of the partnerships tax return must include the following:

  • The net income that the partnership earns
  • The deductible expenses
  • The distribution of the partnership’s net profit or loss among the partners

Each partner in the partnership needs to include the following in their tax returns:

  • Share of any net income or loss in the partnership
  • Any other assessable income such as salaries and wages, dividends or income from any rental property
  • The salary and wages must be included in a payment summary

For CGT (Capital Gains Tax) purposes, each partner:

  • Calculates a capital loss or a capital gain on their partnership share of each asset
  • Owns a proportion of each CGT asset

It must be noted that the individual tax returns by each partner have to be filed irrespective of whether they actually receive their share of income or not.

Steps While Lodging A Partnership Tax Return

The below-mentioned steps are to be followed for lodging a partnership tax return:

  • file a partnerships tax return for reporting the net income. It includes all the assessable income after deducting the allowable deductions and expenses
  • file individual tax returns for each partner
  • each partner pays tax on their share of the net income from the partnership because the partnership itself does not pay any income tax

Ways To Lodge A Partnership Tax Return

Using SBR (Standard Business Reporting) enabled software

SBR or Standard Business Reporting is a standard approach to digital or online record-keeping for simplifying business reporting obligations. You can lodge your partnership tax return directly from your SBR-enabled business software.

Your SBR-enabled software will use a credential that will allow you to securely submit your tax return to the Australian Taxation Office (ATO). When using the cloud-based SBR software, you don’t have to create this credential. Instead, your software provider will create it in your software. For a desktop or locally hosted SBR software (not cloud), you will have to use the Relationship Authorisation Manager to create a machine credential.

Using A Registered Tax Agent

You can contact a registered tax agent to lodge your partnership tax return. Your tax agent should be registered with the TPB (Tax Practitioners Board). So you will get consumer protection using a registered tax agent as the TPB ensures that your agent meets and maintains the required standard or experience and qualifications and complies with the Code of Professional Conduct.

Most registered tax agents can lodge tax returns for their clients after October 31 (the usual deadline) under a special lodgment program. The due date depends on your personal situation too. You should contact a reputed partnership tax agent who can prepare and lodge the tax return for your business partnership properly.

By Paper

You can file your partnership tax return by yourself by the due date of October 31. If you cannot lodge your return by the due date, you can contact the ATO before October 31 to find out whether or not you can lodge it at a later date.

You need to post your lodgment at the below postal address:

  • Australian Taxation Office
  • GPO Box 9845
  • [insert name and postcode of your capital city]

Read More:- What Is Goods And Services Tax, And Why Is GST Return Important?

Remember These Key Points

  • All the profits earned and deductible expenses for a partnership should be declared in the partnership tax return.
  • The distribution of the net income or loss among the partners must be mentioned in detail in the return.
  • The tax return of an individual partner must include their share of the net profit or loss from the partnership. It is mandatory whether or not each partner actually received any income from the partnership.
  • Each partner owns a proportion of every CGT asset, and their tax return must include their calculation of the capital loss or capital gain from their share of each asset.
  • The partnership tax return doesn’t include the capital loss or gain from each asset.

Final Words

Whether you lodge your partnership tax return using a registered tax agent or by yourself. Always go through all the above-mentioned points and check the latest regulations at the official website of ATO. Though you can lodge the return all by yourself, still it is recommended to consult one of the leading tax agent services. The Tax Agent Perth as they always keep up with the various tax laws and will help you prepare and file your return in a proper way, reducing the risk of any error.

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