Partnership Tax Returns

A partnership is one of the more common structures for businesses operated by two or more people — whether family members, friends, or professional associates. It is relatively simple to set up and run, but it comes with personal liability and compliance obligations that need to be properly managed.



At Taxcor, we help partnerships across Australia to stay compliant and financially organised. Our fixed-fee services cover partnership tax returns, BAS, bookkeeping, and ongoing business advice, all handled by experienced professionals who understand the unique position small business partnerships operate in.

Simple and cost-effective to establish

Shared responsibilities and management

Fewer compliance

Suitable for small businesses

What Is a Partnership?

A partnership is a business structure where two or more individuals (up to 20 in most cases) operate a business together with the intention of making a profit. Partners share income, expenses, responsibilities, and management of the business.


Unlike a company, a partnership is generally not a separate legal entity. Each partner is personally responsible for the debts and obligations of the business — including debts incurred by other partners acting in the course of the business.



The partnership itself does not pay income tax. Instead, it lodges an annual partnership tax return that shows the income and expenses of the business, and each partner then declares their share of the profit or loss in their own individual tax return.

Example:

ABC Plumbing Partnership is run by two licensed plumbers who jointly manage the business. At year end, the partnership lodges its own tax return. Each partner then includes their allocated share of the net profit in their individual return and pays tax at their applicable marginal rate.

Advantages

Simple and cost-effective to establish

Shared responsibilities and management

Flexibility in how profits are distributed (subject to the partnership agreement)

Less administrative compliance than a company

Losses can be passed through to individual partners

Disadvantages

Each partner is personally liable for business debts

One partner can bind the others, including for debts they were not aware of

No legal separation between the partners and the business

Profit sharing can create disagreements if not documented clearly

Limited asset protection compared to a company or trust

Things to Consider

Partnerships can work well, particularly for family businesses and professional practices. But because each partner is personally on the hook for business obligations, it is critical to understand the risks before entering into one.


A written partnership agreement is not legally required, but it is strongly recommended. A good agreement covers profit-sharing arrangements, responsibilities, decision-making authority, dispute resolution, and what happens if a partner wants to exit the business. Without one, disputes can become costly and difficult to resolve.


From a compliance perspective, partnerships need an ABN and may need to register for GST if turnover reaches $75,000. BAS must be lodged where GST applies, and accurate financial records must be maintained throughout the year. Even though the partnership itself does not pay tax, the partnership tax return must still be lodged each year before partners can finalise their individual returns.



Good bookkeeping is also important for tracking partner drawings, capital contributions, and GST obligations. Separate business bank accounts keep the partnership finances clean and make year-end accounting much simpler.

How We Can Help

We provide comprehensive accounting and tax services for partnerships, including:

Partnership registration, ABN, TFN, and GST registration

BAS and IAS preparation and lodgement

Preparation of annual financial statements

Partnership tax return preparation and lodgement

Individual partner tax return preparation

Tax planning and minimisation strategies

Bookkeeping and payroll services

Business structure review and advice

Management reporting

Partner profit distribution reporting

Xero, MYOB, or QuickBooks setup and training

Taxable Payments Annual Report (TPAR)

Ongoing software and business advisory support

Fixed-Fee Packages

  • Fixed annual or monthly pricing — no hidden costs
  • Monthly accounting and bookkeeping packages available
  • General accounting advice included
  • Basic tax planning as standard

Cloud Accounting Software

We support Xero, MYOB, and QuickBooks, and can assist with setup, training, and ongoing support.

Frequently Asked Questions

  • Do partnerships need to lodge a tax return?

    Yes. Even though the partnership does not pay income tax itself, it must lodge an annual partnership tax return with the ATO. Each partner then reports their share of the profit or loss in their individual tax return.

  • How is partnership income taxed?

    Partnership income is distributed to the partners according to their agreed profit-sharing arrangement. Each partner pays tax on their allocated share at their own marginal tax rate, as part of their individual return.

  • Can partners receive wages from the partnership?

    Generally, partners are not treated as employees and cannot receive wages in the traditional sense. They may receive drawings or profit distributions based on the partnership agreement. In some cases, a partnership deed may allow for a partner’s salary as a prior charge against profits — but this needs to be properly documented.

  • What records should a partnership keep?

    Partnerships should maintain records of income and sales, business expenses, invoices and receipts, bank statements, payroll and employee records, superannuation contributions, GST records, and partner drawings and capital contributions. All records should generally be kept for at least five years.

  • Can you help with overdue partnership returns?

    Yes. We assist partnerships that have fallen behind on their lodgement obligations. We will organise your records, prepare outstanding returns, and liaise with the ATO to bring things up to date.

  • Do partnerships need to register for GST?

    Yes, once annual turnover reaches $75,000. Some partnerships register voluntarily before reaching that threshold.