Thanks for your reply mate, a couple of quick questions with regards to this.
Just out of interest do you have or hold a partnership/company?
I think the main reason we have a preference for a partnership is the lower initial start up costs, and lower running costs. It gets us up and running as such. With regards to what you said above for a company, does the same apply for a partnership? I have seen the following online:
The Partnership will also need its OWN Business Tax File Number (TFN) – unlike a Sole Trader, who uses his/her own personal TFN.
For the Partnership, this means that all partners will still have their own personal TFN for their own personal individual income tax return, but the Partnership as a whole will have its own TFN on top of that. Yes, this means that in addition to lodging your own personal tax return, the Partnership itself will have to lodge its own, separate tax return too.
But note that a Partnership in itself is not liable to pay income tax or PAYG installments. Instead, the individual income (and share of profits/losses) you, as a partner, make from the Partnership will need to be included in your own personal income tax return. THAT is how tax is paid on income generated by the Partnership.
So to reiterate – the Partnership itself does NOT get taxed, and that’s because it is NOT a separate legal entity (unlike a Company business structure).
That means that come tax time any income you make through your Partnership is counted together with your own personal individual income (so that means it is lumped in with income you make from other sources too – such as a job you might have on the side). By default, the law will assume that all Partnership income/profits/losses will be split equally among all partners, but it doesn’t necessarily have to be so. This is one of many areas where a proper Partnership Agreement can be useful, as mentioned earlier.
How does this work with regard to the tax for income/profits? Just wondered what the tax return would entail for a partnership? As we are trying to consider the impact this would have on our personal tax implications (both his is Aus, mine in UK).
If we deposit say 10k each into a company account for the partnership, is this liable to being taxed or is it just the profits we are then taxed on?
