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5 Partnerships
Partnership (ITAA)
1st Limb: Persons carrying on a business?
- Case S75
2nd Limb: Receipt of Joint Income
- FCT v McDonald
Net Income
(s92(1))
Partnership Loss
s92(2)
Property Interest?
According to proportionate
ownership of income
producing asset
*cannot stream losses!
- FCT v McDonald
Partners Salary
1) Consider salary is advance
distribution of net income
TR2005/7
2) Remaining income will be slit
between partners accordingly
- Case S75
*TR2004/D4 excessive salary
over net income taken out of
future profits in subsequent years
Tax Treatment
For CGT purposes,
each partner has
fractional interest in
partnership assets
s106-5 and s1085(2)(c)
Trading Stock
Property Interest?
According to
partnership
agreement
Tax treatment
1) Acq/disposal taken at
partnership level
2) Depreciation/
balancing charges taken
at partnership level s90
Proceeds s116-20(1)(b)
Proportionate share MV of
new asset/cash acquired
from new partner
Work in progress
Definition: s25-95(3)
1) Entity agrees to pay amt to another entity
2) Amt can be identified as being in respect to work,
and recoverable debt has arisen in respect of work
*does not incl goods in process of manufacture
Partnership Borrowings
FCT v Roberts, FCT v Smith, TR 95/25
-purpose of funds more important than use
-borrowings against capital used for private purpose is
not deductible
-funds used for income producing purposes deductible
-Refinancing principle
funds used to replace capital is
deductible (except ARR for goodwill and assets)
-Interest on loans paid against partners capital amount
is not deductible as it is paid to partners (2005PP)
Limited partnerships
CLP 108
Assessable when:
WIP amts are received in the
income year s15-50