How to lodge tax returns for share trading as a business in a Partnership?

[whacky]

Hi,
We formalised our "Partnership" and created a ABN, TFN and a business name. We did not opt for the 'incorporation' structure. Untill now, we have been actively trading using a joint account (with Interactive Brokers) and the joint account is linked to our personal TFNs.

Interactive Brokers have advised me that they cannot open "Partnership" accounts for Australian clients. So, we are stuck with "joint account" for trading but need to lodge tax returns under the Partnership ABN/TFN.

Has anyone else gone through this headache? how did you navigate through this maze?
Your input will be much appreciated.

Thank you,

 

[rnr]

Hi,
We formalised our "Partnership" and created a ABN, TFN and a business name. We did not opt for the 'incorporation' structure. Untill now, we have been actively trading using a joint account (with Interactive Brokers) and the joint account is linked to our personal TFNs.

Interactive Brokers have advised me that they cannot open "Partnership" accounts for Australian clients. So, we are stuck with "joint account" for trading but need to lodge tax returns under the Partnership ABN/TFN.

Has anyone else gone through this headache? how did you navigate through this maze?
Your input will be much appreciated.

Thank you,

Hi whacky,

I'm assuming, since you are asking these questions, that you are not employing the services of a tax agent and/or accounting firm, although you may well be trying to keep costs down by doing some of the work yourself.

When you applied for The Partnership ABN & TFN, I would hazard a guess that you would need to provide each partners full name, address and personal TFN so the ATO has this info on file already.

From the joint account details with IB you will need to create a Profit & Loss Account, Balance Sheet and probably a Capital Account for each Partner. If some costs have been paid jointly by the Partners the you will need to record these as well.

The only task remaining is to complete a current year "Partnership Return" which can be downloaded from the ATO website along with an instructions booklet.

This info is given only as a guide to some of the details you need to address but please do not treat this a definitive response (i.e. DYOR).

Cheers,
Rob

 

[whacky]

Hi whacky,

I'm assuming, since you are asking these questions, that you are not employing the services of a tax agent and/or accounting firm, although you may well be trying to keep costs down by doing some of the work yourself.

Yes, that is correct.

When you applied for The Partnership ABN & TFN, I would hazard a guess that you would need to provide each partners full name, address and personal TFN so the ATO has this info on file already.

Yes, all the partners details are recorded against the Partnership's ABN/TFN and Business Name

From the joint account details with IB you will need to create a Profit & Loss Account, Balance Sheet and probably a Capital Account for each Partner. If some costs have been paid jointly by the Partners the you will need to record these as well.

The only task remaining is to complete a current year "Partnership Return" which can be downloaded from the ATO website along with an instructions booklet.

This info is given only as a guide to some of the details you need to address but please do not treat this a definitive response (i.e. DYOR).

That sounds fair but my concern, joint account is linked to personal TFNs. Lets say, I make $1000 trading profit in a year. ATO might receive the notification from IB that these individual TFNs (of Joint Account) have $1000 capital gain (which gets lobbed into my total income for the year).

I file a "Partnership Return"claiming that the Partnership made $1000 profit. Now, this $1000 profit will get lobbed into "Profit/Loss from Partnership" in my individual tax return

That could lead to double-taxing, wouldn't it? The same $1000 profit shows up in my "capital gains" and "profit/loss from Partnership"!

Thanks btw for replying!

 

[HelloU]

hey
no expert and above my pay grade .....
ATO has no way of knowing how much profit someone makes - they just know that trades were done - cos the holder determines which portfolio parcels were traded, not the ATO.
A discretionary trust is a vehicle that some might use for "profit shifting" (partnerships are not responsible for debt so unloved in finance - joint is basically the 50-50 partnership where debt can be captured - so it is used)
thats all i got

 

[rnr]

@whacky

From the way I see it whatever info IB supply to the ATO it is on the basis of joint ownership. The ownership of any securities that are purchased will be in joint names.

 

[barney]

Hi,
We formalised our "Partnership" and created a ABN, TFN and a business name. We did not opt for the 'incorporation' structure. Untill now, we have been actively trading using a joint account (with Interactive Brokers) and the joint account is linked to our personal TFNs.

Probably not much help … but for the record, My (Our) Trading account is registered with both mine and my wife's names on it ……. (about 10+ years now)

Whatever profit or loss is registered on that trading account for the year is simply divided by two and added to our respective personal tax returns … along with any allowable deductions of course (eg. my 2016 porche, my 10 screen computer and all overseas holidays …. all divided by two)

I have neglected for the last 2 years to tell my wife that I claim my 9 foot tinny on my tax return only. I am a bad man I know

As for a formalised Partnership with a separate ABN and TFN … my guess would be either one of two scenarios …

1) The tax return for the partnership account would need to be assessed first, then the "resulting" profit/loss simply added to your individual returns …. or

2) More likely, the partnership account is now a separate entity and any resulting profit/loss/tax liabilities are only registered on that tax return .. ie. any profit/loss is not duplicated on your personal returns, therefore no possible double taxing problems.

All my jibbering above aside …. I think a 5 minute chat to a decent accountant would set you straight … and I am definitely not a decent accountant

Good luck and keep us all posted

 

[whacky]

hey
no expert and above my pay grade .....
ATO has no way of knowing how much profit someone makes - they just know that trades were done - cos the holder determines which portfolio parcels were traded, not the ATO.
A discretionary trust is a vehicle that some might use for "profit shifting" (partnerships are not responsible for debt so unloved in finance - joint is basically the 50-50 partnership where debt can be captured - so it is used)
thats all i got

Thanks mate.

 

[whacky]

@whacky

From the way I see it whatever info IB supply to the ATO it is on the basis of joint ownership. The ownership of any securities that are purchased will be in joint names.

Ok, thats a good point. IB should be reporting on the ownership as "joint" and towards individual TFNs.

 

[whacky]

Probably not much help … but for the record, My (Our) Trading account is registered with both mine and my wife's names on it ……. (about 10+ years now)

Whatever profit or loss is registered on that trading account for the year is simply divided by two and added to our respective personal tax returns … along with any allowable deductions of course (eg. my 2016 porche, my 10 screen computer and all overseas holidays …. all divided by two)


Porche as deductions. Thats interesting

I have neglected for the last 2 years to tell my wife that I claim my 9 foot tinny on my tax return only. I am a bad man I know

Porche and a tinny as deductions. I need a master class, My Lord.

As for a formalised Partnership with a separate ABN and TFN … my guess would be either one of two scenarios …

1) The tax return for the partnership account would need to be assessed first, then the "resulting" profit/loss simply added to your individual returns …. or

2) More likely, the partnership account is now a separate entity and any resulting profit/loss/tax liabilities are only registered on that tax return .. ie. any profit/loss is not duplicated on your personal returns, therefore no possible double taxing problems.

I would be 1) for sure.

All my jibbering above aside …. I think a 5 minute chat to a decent accountant would set you straight … and I am definitely not a decent accountant


Good luck and keep us all posted

Thanks mate. The problem with Australian accountants is, most of them (I am generalising here), cannot understand that someone can invest in things other than property. So, they all get a bit confused and start winging it. I am refering to most main street accountants and not the boutique ones.

 

[rnr]

@whacky

quoted from your post #1
"Until now, we have been actively trading using a joint account"

quoted from your last post (#9)
"The problem with Australian accountants is, most of them (I am generalising here), cannot understand that someone can invest in things other than property."

You will need to determine whether, prior to completing any accounts for the Partnership, it is in fact investing or trading.

From memory the ATO has some interesting details on their site relating to trading in shares/equities as a business.

 

[whacky]

@rnr

Wrong choice of words, that was meant to be " ....cannot understand that someone can make profit in things other than property."

Yes, I have checked against ATO's criteria and we qualify.

 

[HelloU]

confused now ......

nothing has changed to the joint account opened years ago and it will continue to be reported as a joint account using the 2 TFN's already attached. It has nothing to do with the partnership and the new TFN.

invisible ink (??..... u use a joint account and then do ur tax profit/loss (both peeps) as traders ??) end of invisible ink