ATO Reporting and tax obligations for Partnerships

Partnerships are the most commonly used business structures when two or more people come together to form a business. However, many people who have partnerships don’t necessarily understand the ATO reporting obligations and how tax is paid.

A partnership is easy and cheap to set up and the overheads are low compared to a company. It must have its own tax file number (TFN) and ABN, but it is not considered a separate legal entity from the partners. Note that while a partnership may have employees, the partners are not considered employees of the business.

The business must still lodge a separate tax return each year, however, the profits (or losses) from the business are divided between the partners in the agreed proportions and calculated as part of the assessable income for each partner. This means that a profit will increase the assessable income for each partner, and a loss will decrease the assessable income for each partner. Tax is then calculated for the partners in their individual tax returns at their marginal rate.

For more information about partnerships, visit the ATO website.

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