Tax Agent Perth
Tax Agent PerthTax Agent Perth
The Partnership Tax Rules 2025 show a major turning point for businesses in Perth. It is followed by the ATO (Australian Taxation Office) compliance programs for business structures and profit distributions. From 1st April 2025, ATO has required small businesses to report quarterly to monthly GST (Goods and Services Tax) reporting for small businesses to reduce the occurrence of non-payment, late or non-lodgment, and incorrect reporting.
To avoid the impact of such instances on your business, this blog presents the new ATO partnership rules for you.
As per the ATO, a partnership is when two or more people/companies run a business together and share their income. A partnership itself doesn’t pay income tax, but it lodges the partnership tax return Australia to show how much money the business made and how it is shared among partners. Afterwards, each partner pays tax on their shares of profits.
For example, if you and your business partner make $500,000 and split it in a 60:40 ratio, then one partner will get $300,000 and the other will get $200,000 on their tax returns. This reflects a typical profit share partnership tax scenario.
Apart from taxes, partnerships also have other duties such as registering for GST, lodging BAS (Business Activity Statements), paying staff through PAYG (Pay As You Go), and reporting wages through STP (Single Touch Payroll). It’s also recommended to consult a registered tax agent to ensure you’re fulfilling these duties correctly.
When you operate your business as a partnership, you have to lodge a partnership tax return for reporting the net income of the partnership.
From your end, you report on your individual tax returns for these partnership agreement tax rules:
If your partnership earns $75,000 or more in annual turnover, then you are required to register for GST. You will also need to lodge regular BAS to report GST, PAYG withholdings (if you have employees), and report wages of your staff using STP. Businesses weighing their structure options may benefit from comparing partnership vs company tax implications before proceeding.
Starting from 1st July 2025, the ATO has rolled out several changes that affect how your partnerships operate and report income. If you are in a partnership, now is the time to review your structure, documentation, and tax reporting formats. To go through all of this, consider seeking advice from a Tax agent Perth.
Here are some of the main changes mentioned.
According to ATO, partners are not employees of their partnership, even if they receive a regular payment that resembles to salary. These payments are treated as part of your share of the partnership profits, not as deductible employee wages. This helps to ensure your tax reporting is correct at the time of lodging the partnership tax return.
Your partnership’s profits or loss distribution ratio and actual figures should be reflected in your partnership agreement. For example, if one partner now does more work and takes a larger share, your agreement should be updated to reflect this change. It keeps all information clear, helps to avoid disputes, and ensures your partnership profit profit-sharing tax stays transparent.
If your partnership receives PSI generated personally by you or your partner, then the PSI is attributed back to the individual, not the partnership. This procedure is applicable if the PSI does not pass the Personal Services Business (PSB) test.
But according to new guidelines, even if a partnership passes the PSI income test along with the PSB test, the ATO can apply PartIVA anti-avoidance rules. This can be applied if they observe retention of profits among partners without a valid reason.
It can also occur if there is a splitting of income among partners unrelated to your partnership. In such cases, you must verify if you’re classified as a personal service business.
The ATO is paying closer attention to how partnerships manage record-keeping and reporting. The 2025 ATO partnership tax instructions require partnerships to retain detailed business records for a minimum of five years. These records should include documentation for bad-debt write-offs, lease payments, interest to non-residents, royalties, depreciation, and other business expenses.
For GST input tax credits, partnerships claim only the GST exclusive amount and maintain full input tax documentation alongside Partnership Income Tax claims.
Changes in business partnerships can lead to legal and financial risk for your business, including liability for debts and potential dissolutions. They may also attract ATO notices if not properly reported, which can lead to risking audits or penalties.
Such changes also impact cash flow as capital is added or withdrawn and require updates to agreements and regulations. For this reason, it’s important to update partnership deeds as your business evolves.
A partnership tax agent ensures your business compliance with ATO regulations by managing BAS lodgements, reviewing PSI rules, and advising on profit structuring. They also help your partnership to meet tax obligations, avoid penalties, and optimise financial outcomes.
As legal changes to partnership regulations increase, taking expert guidance becomes more important.
To stay compliant with ATO and business rules, here are the key steps you have to follow:
The ATO’s 2025 changes introduce stricter rules on profit allocation, GST reporting, and PSI compliance. In order to stay compliant on these aspects, regularly update your partnership agreement, keep records for a minimum of five years, and lodge returns on time. For expert support, contact your local partnership tax agent in Perth. They can help you navigate these updates and ensure your partnership meets all tax obligations.
These rules require that your partnership income allocations exactly reflect those as given in the agreement. The ATO now also focuses more heavily on GST compliance and personal services income disclosures.
To do this, you must fill out your partnership bookkeeping requirements and file Form P online via myGov or through a tax agent. It should include all income, deductions, and how profits or losses are distributed.
If most of the income is generated by a partner’s skills or efforts, then it can be attributed to that partner individually. It is also required to pass the PSB test to keep the income within the partnership.
If the partnership receives PSI, it may be taxed at the individual partner level. This depends on whether the income meets the PSI income test and PSB rules.
Any change in profit distribution must be reflected in the partnership agreement. This ensures compliance and prevents issues during ATO review.