Taxation Law: Provisions of Partnership Taxation and FBT Explained

Taxation Law

TABLE OF CONTENTS
Question 1: Provisions of partnership taxation..........................................................................3
Question 2: Provisions of FBT...................................................................................................9
References................................................................................................................................11

QUESTION 1: PROVISIONS OF PARTNERSHIP TAXATION
Overview of Income Tax legislation
ITAA 36 and ITAA 97 develop the base of income tax provisions and operate in accordance
with Income Tax Regulation 1936 and Income Tax Assessment Regulations 1997. The main
obligation of Income Tax 1986 is imposition of tax on taxable income of assessee and rate
relating to same. The main source of taxation power is specified in section 51 (ii) of ITAA 97
that it is in hands of commonwealth Parliament to make laws in relation to taxation (Chardon,
Freudenberg and Brimble, 2016).
Further, section 995-1 of Income Tax Assessment Act 1997, specifies partnership as an
association of persons engaged in carrying on an organization or business as partners for
receipt of any income jointly but does not comprise company (Andrikopoulos and Kostaris,
2017). Partnership does not pay tax as per the terms of section 91- ITAA 36 but is required to
file return as per section 91. However, each partner is required to pay tax on their specific
share of net partnership income or loss. In case of loss has been incurred in partnership than
each partner is allowed to claim the loss for their specific share of partnership.
Net income of partnership is the assessable income of partnership and is calculated in case
the partners are considered as a taxpayer by adjusting all allowable deductions. According to
the s.92, while computing the net income or loss of partnership, the treatment of partnership
is done as is if they are a resident taxpayer (Reimer, Schmid and Orell, 2018). Some special
concessions are not accessible to the partnership; on the other hand they are attributed to the
separate partners. The share of the net income of partnership is not gained by the partners till
the time it has been determined. This will be done in the end of the viable accounting period.
Net income of partnership for the year ended on 30th June 2017
Table 1: Statement presenting net income of partnership for the year ended on 30th June 2017
Particular Amount (in $)
Income
Business Sales (Cash) 150170.00
Business Sales (Credit) (working note: 1) 31885.00

Increase in Stock (working note :2) 630.00
Total 182685.00
Expenses
Cash Purchases 31155.00
Credit Purchase (working note : 3) 129188.00
Car Expenses (working note : 4) 2364.00
Electricity expenses (working note : 5) 1176.00
Council rates (working note : 6) 310.20
Business insurance 1250.00
Mobile bill (working note : 7) 633.60
Depreciation (working note : 8) 3972.47
Union fees 284.00
Account charges 595.00
Repair expenses (working note : 9) 290.00
Interest on loan (working note : 10) 5500.00
Total Expenses 175843.95
Net Business Income 5966.73
Working Papers
Note: 1
Credit Sales
Particular Amount (Dr.) Particular Amount Cr.
Opening Balance B/d 3925 Payments from debtors 32800
Credit Sales (b/f) 31885 Closing Balance c/d 3010
Total 35810 35810