Taxation Law Assignment: Partnership Taxation and Deductions

This report analyzes taxation law, specifically focusing on the taxation of partnerships. The assignment addresses two key questions: the tax treatment of partnership income and losses, and the deductibility of various expenses. It references the ITAA 1936 and relevant sections, such as section 90, 91, and 92, to explain how partnership income is distributed and taxed among partners. The report covers the deductibility of interest paid to partners and the non-deductibility of partner salaries when calculating net income. It also examines the tax treatment of superannuation contributions for both partners and administrative staff, clarifying the allowable deductions and relevant sections of the law. The report concludes by referencing key legal cases and academic sources.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................2
Answer to A:..........................................................................................................................2
Answer to B:..........................................................................................................................3
References:.................................................................................................................................4

2TAXATION LAW
Answer to question 1:
According to the “division 5 of the ITAA 1936” partnership is not regarded as the
separate entity under the general law and the partnership does not pay tax. Rather under
“section 92, of the ITAA 1936” it is the partners that pay tax on the profits that is distributed
to them. “Section 91” explains that partnership should lodge income tax returns in order to
show how the profits are distributed among the partners (Sadiq 2019). The net income of the
partnership includes the taxable income after deducting the allowable deductions.
Under “section 92 (2)”, the net partnership loss for 2017/18 amounting to $20,000 is
not allowed for deduction rather it will be distributed to individual partners. With respect to
“section 90”, the net income of $321,000 in 2018/19 must be split equally among the three
partners with each getting $107,000. As held in “FCT v Harris (1980)” interest paid to
partners A of $9,000 will be deductible to partnership but it will be taxable as income to
Partner A under “section 6-5, ITAA 1997”. Under “section 90, ITAA 1936” partner’s
salaries are non-deductible while computing net income of partnership. The salary paid to
Partner B is non-deductible because prior claim on profits before the balance is shared among
the partners.
Answer to question 2:
Answer to A:
According to the “section 90”, while computing the net income of partnership no
deduction for superannuation contributions for partners is allowed (Woellner et al., 2016).
Instead the individual partner can get the deduction under the “section 290-150” where the
conditions under the “subsection 290-155 to 290-175” are met.

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Answer to B:
While superannuation contribution paid for the administrative staff members is an
allowable deduction to the partnership. This is because the expenses were incurred during the
course of partnership for the derivation of taxable income.

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References:
Sadiq, K., 2019. Australian Taxation Law Cases 2019. Thomson Reuters.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.