Structures
A partnership files a return but pays no tax. The income lands on each partner — and so, jointly, does the liability.
What it is
A partnership is two or more people carrying on business together. It files its own return, but it is a conduit rather than a taxpayer: the profit is divided between the partners in their agreed shares, and each partner pays tax on their share in their own return, at their own rate.
Liability is the part people underestimate. Partners are jointly and severally liable, which in practice means a creditor can pursue whichever partner can actually pay. Your exposure is not limited to your share.
You can form one with a handshake, and plenty of people do. A written partnership agreement — profit shares, what happens when someone wants out, who signs what — costs very little and is the only thing that settles an argument later.
Typically Two or more people in business together — trades, professional practices and couples running something jointly.
Every year
The obligations that come with this structure, in the order they tend to catch people out.
An IR7. The partnership itself pays no tax; the return allocates the profit to the partners.The partnership return. The partnership itself pays no tax; the return allocates the profit to the partners.
Every partner also files an IR3 showing their share, and pays tax at their own marginal rate.Every partner also lodges an individual return showing their share, and pays tax at their own marginal rate.
Provisional tax is worked out for each partner individually, not for the partnership.PAYG instalments are worked out for each partner individually, not for the partnership.
The partnership registers and files its own GST once turnover passes $60,000 — not the partners.The partnership registers and lodges its own BAS once turnover passes $75,000 — not the partners.
Profit shares, drawings and any salary arrangement between partners. If they are only in someone’s head, they will be in dispute eventually.
The partnership return and every partner’s own return come out of the same set of numbers. We prepare them together, and each partner gets their own share explained to them rather than a spreadsheet to interpret.
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Plenty of people run more than one of these at once — a company and a trust, or a job and a rental. We handle the set, not the piece.
Freelancers, contractors, tradies and anyone trading under their own name.
Read it →Founders, family businesses and anyone who has incorporated or is about to.
Read it →Family trusts holding a home, a rental, a business or investments.
Read it →Anyone with a rental — one property, a portfolio, or a holiday home let out part of the year.
Read it →Ten minutes to start. No credit card, and we will tell you if you are better off elsewhere.
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Not sure which structure you are in, or whether it is still the right one? Ask.
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