Question:
Save tax - family partnerships
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
This is an established and relatively simple mechanism for splitting income between family members. If your spouse carries out some work in the business you should consider forming a partnership. It is very important to document the arrangement to ensure the partners are seemed to be operating a genuine partnership. Be sure to:
+ Have a written partnership agreement prepared by your solicitor;
+ Open a bank account in the name of the partnership;
+ Distribute profit in the manner decided upon;
+ Ensure that each partner has control and disposal of their share of the partnerships profits;
+ Obtain an ABN for the partnership and if over the threshold, register for GST; and
+ When dealing with others, use business cards, invoices, etc. which clearly demonstrate the existence of the partnership. Do not continue to use stationary which is in your name only.
Partnerships provide tax savings because each partner is taxed separately and individually on their respective share. A partnership is not a separate legal entity and is not taxed separately. If your partnership is providing personal services it will be necessary to meet the requirements under the personal services income rules.
