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Articles
No Deduction for Payment of Partnership

Personal Liability Trustee Company of Directors?

Long Term Non Reviewable Contracts and GST

Redundancy Implied

Retail Premises - Leasing Procedures

Fees for Henry Kaye Investment Seminars

Pasminco Tax Loss

Super Choice Reminder

Land Tax Changes – Queensland and Victoria
Super Choice
Superannuation Guarantee on Back Pay
Athletic Activities ? Sufficient to be a Business
Late Superannuation Payments - BEWARE
No Deduction for Payment of Partnership

A Tax Office Interpretive Decision has stated that for the purposes of determining the net income of a partnership, the payment of 'salaries' to partners in a partnership is not an allowable deduction.


Under the law, net income of a partnership is calculated by subtracting all allowable deductions from the partnership assessable income. Each partner is then required to include their share of the partnership net income or loss in their individual income tax returns. 

 

The courts have adopted the view that a payment of ‘salary’ to a partner only constitutes an advance or drawing against the partnership profits and not a payment made in respect of employment. This view is based on the fact that a partnership is not a separate legal entity and, as a result, it has been held that a partner cannot be an employee and a partner at the same time. 

 

Accordingly, the payment of a partner’s ‘salary’ cannot be classified as a cost of the business and will not constitute an allowable deduction in determining the net income of the partnership.



23rd-September-2005