These instructions will help you complete the Partnership tax return 2020. They are not a guide to income tax law. You may need to refer to other publications.
When we say ‘you’ or ‘your business’ in these instructions, we mean either you as the partnership that conducts a business or you as the registered tax agent or partner responsible for completing the tax return.
These instructions contain abbreviations for names or technical terms. Each term is spelt out in full the first time it is used and there is a list of abbreviations.
What’s new?
New measures – economic response to novel coronavirus (COVID-19)
New rules follow the Government's economic response to novel coronavirus (COVID-19).
If you as an employer received a cash flow boost under the Boosting cash flow for employers measure, the amount is tax free (non-assessable non-exempt income) and you are entitled to a deduction for the PAYG withholding paid.
From 12 March 2020 until 30 June 2020, the instant asset write-off:
- threshold is $150,000 (up from $30,000)
- eligibility range covers businesses with an aggregated turnover of less than $500 million (up from $50 million).
Businesses with an aggregated turnover of less than $500 million are able to accelerate their depreciation deductions on the purchase of certain new depreciable assets. This applies to eligible assets held and first used or installed ready for use from 12 March 2020 until 30 June 2021.
Businesses may be eligible to receive the JobKeeper payment in respect of:
- eligible employees
- an individual who is an eligible business participant.
Any amount you received is assessable income of the business.
See also:
- COVID-19 – Information about ATO measures and tailored support
- COVID-19 – Frequently asked questions
- Support for business and employers
Hybrid mismatch rules
The hybrid mismatch rules (‘the rules’) have been implemented and targeted towards certain transactions and arrangements which result in either of the following outcomes:
- a deduction is available in two countries for the same payment, or
- a deduction is available for a payment in one country, but the corresponding income is not included as assessable income in the recipient's country.
There is no minimum income or turnover threshold for the application of these rules and the rules can apply to any entity.
The rules have an effective start date for income years beginning on or after 1 January 2019.
The rules may apply where there are dealings with foreign countries that result in either of the above outcomes.
Where the rules apply, a deduction may be disallowed for an otherwise deductible expense, or an amount may be included in assessable income.
For more information, see Hybrid mismatch rules.
Significant Global Entity (SGE) definition amendment
In the 2018-19 budget, the government announced amendments to the definition of significant global entity. The amendments broaden the definition to ensure consistent application across all types of entities, irrespective of whether they are a member of a group that is consolidated for accounting purposes.
From 1 July 2019, an entity is an SGE for a period if it is:
- a global parent entity with an annual global income of A$1 billion or more
- a member of a group of entities consolidated for accounting purposes, and one of the other group members is a global parent entity with an annual global income of A$1 billion or more
- a member of a notional listed company group, and one of the other group members is a global parent entity with an annual global income of A$1 billion or more.
A notional listed company group is a group of entities that would be required to be consolidated as a single group for accounting purposes if a member of that group was a listed company. Any exceptions in accounting principles that may permit an entity not to consolidate with other entities are disregarded.
An entity is also an SGE if it, or any other member of the actual or notional accounting consolidated group of which the entity is a member, has been given a notice by the Commissioner determining that its global parent entity would have an annual global income of A$1 billion or more for any period during the income year.
The SGE status of an entity must be recorded in the relevant income tax return. If an entity is an SGE and lodges a Partnership tax return it should print X at G1 at item 2 Status of business.
See also:
Country by country reporting entity definition
As a result of the legislative changes to the definition of an SGE, the scope of an SGE is wider than the scope of entities required to undertake country by country reporting. A new definition of ‘Country by country reporting entity’ (CBC reporting entity) has therefore been introduced. In effect, a CBC reporting entity is an entity that would be an SGE had the definition of an SGE permitted the exception to consolidation related to investment entities in the accounting principles.
From 1 July 2019, an entity is a CBC reporting entity if it is not an individual, and is:
- a country by country reporting parent
- a member of a country by country reporting group, and one of the other group members is a CBC reporting parent with an annual global income of A$1 billion or more
- A country by country reporting group may be a group that is consolidated for accounting purposes as a single group or a notional listed company group. A notional listed company group is a group of entities that would be required to be consolidated as a single group for accounting purposes if a member of that group was a listed company. Unlike the SGE definition, the exception to consolidation in the accounting principles related to investment entities is not disregarded; that is, if applicable, when determining whether an entity is a CBC reporting entity, the investment entity exception in the accounting principles should be applied.
If an entity is a CBC reporting entity, it will have CBC reporting obligations. For income years from 1 July 2019, CBC reporting obligations depend on whether an entity was a CBC reporting entity at any time in the preceding income year. This is a change from previous years where CBC reporting obligations depended on whether an entity was an SGE at any time in the preceding income year.
The CBC reporting entity status must be recorded in the relevant income tax return. If an entity is a CBC reporting entity and lodges a Partnership tax return, it should print X at G2 at item 2 Status of business.
See also:
Partners and CGT small business concessions
Where a capital gain arises from a CGT event that involves the creation, transfer, variation or cessation of an interest or right that entitles someone to the income or capital of a partnership, the partners in the partnership can no longer access the small business CGT concessions where:
- the CGT event occurred after 7.30pm (AEST) 8 May 2018, and
- the interest or right is not a membership interest held by the person with the entitlement.
Stapled Structures
Measures were introduced to address risks posed by arrangements involving stapled structures and to limit access to concessions currently available to foreign investors for passive income. A stapled structure is an arrangement where two or more entities that are commonly owned (at least one of which is a trust) are bound together, such that interests in them (such as shares or units) cannot be bought or sold separately. For more information see Stapled structures.
The following changes took effect from 1 July 2019:
- A 30% managed investment trust (MIT) withholding tax is applied to trading income that is converted to passive income via a stapled structure or distributed by a trading trust, and to income from agricultural land and residential housing (other than affordable housing).
- Tax exemptions for foreign pension funds and sovereign wealth funds are limited to passive income and portfolio-like investments only (typically interests of less than 10%).
Non-concessional MIT income (NCMI)
MIT withholding tax applies to fund payments made by a withholding MIT to foreign residents. For recipients in an exchange-of-information country, the rate of MIT withholding tax was 15%. From 1 July 2019, the MIT withholding tax rate became 30% to the extent that the fund payment is attributable to non-concessional MIT income (NCMI).
Subject to certain exceptions, an amount of a fund payment will be NCMI if it is attributable to income that is:
- MIT cross staple arrangement income
- MIT trading trust income
- MIT residential housing income, or
- MIT agricultural income.
Transitional rules apply to appropriately protect existing arrangements from the impact of the amendments. If the transitional rules apply, the concessional MIT withholding tax rate of 15% (for recipients in exchange of information (EOI) countries) will continue to apply for the relevant transitional periods. New, approved, economic infrastructure projects may also be concessionally taxed.
What is Excluded from NCMI?
From 1 July 2019 certain income derived by sovereign entities from portfolio-like interests in MITs (or Australian companies) is non-assessable non-exempt income that is also exempt from withholding tax. However the exemption does not apply to NCMI or amounts that are excluded from NCMI. 'Excluded from NCMI' amounts are amounts that are attributable to income that would be NCMI but for:
- Approved economic infrastructure facility exception (subsection 12-437(5) of Schedule 1 to the TAA 1953)
- Transitional – MIT cross staple arrangement income (section 12-440 of Schedule 1 to the TAA 1953)
- Transitional – MIT trading trust income (section 12-447 of Schedule 1 to the TAA 1953)
- Transitional – MIT residential housing income (section 12-451 of Schedule 1 to the TAA 1953)
- Transitional – MIT agricultural income (section 12-449 of Schedule 1 to the TAA 1953)
Additional fields for Stapled structures
The partnership tax return has been amended to accommodate the amendments by adding the following:
- item 32 Non-concessional MIT income (NCMI).This section is to correctly report NCMI and Excluded from NCMI in relation to primary and non-primary production income generating activities.
- new fields to the Statement of distribution.
See also: