Question: How is a partnership taxed?
Answer:A partnership is not its own legal entity like a company, but a partnership must still have a Tax File Number (TFN) and Australian Business Number (ABN) and it must lodge a tax return. The partnership as a whole may lodge a tax return, or individual partners can lodge their own tax returns.
Partners are taxed based on the proportion of partnership income (profits and losses made by the partnership) that they receive in a financial year. You can see it as a partnership being an entity through which the profits and losses made “pass through” the business to the partners. Partners must therefore treat their share of the net income as personal income, and identify it as such on their individual tax returns. This is why incorporation is seen as a great way to reduce your tax burdens, as companies are taxed at a lower, fixed rate.
