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Non-resident partnership deductions

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Hello,

 

The information online about partnerships with non-resident partners seems to be scarce and I wasn't sure how it worked after researching online. My friend (who is a resident of Vietnam and resides there) and I (resident of Australia who resides here) wanted to start a partnership in Australia selling clothing. She handles all the business necessary in Vietnam and I handle all the business necessary here with a 50/50 agreement. My question is, how do tax deductions work with a non-resident partner?

 

For example, if she spent the equivalent (after conversion) of $100aud in Vietnam on stock for the business, would I be able to claim a deduction for $50 of that in my tax return since we have a 50/50 partnership?

To complicate things more, say for example, she had to drive to the factory to collect the stock (or elsewhere in the course of producing income for the business), I'm assuming we wouldn't be able to deduct 68c per kilometer that she travelled as the cost of petrol there would be significantly cheaper than here. Then the question is, what can I actually claim as a deduction from her side of dealing with the business? Or can I not claim anything from her side?

I appreciate any guidance.

 

Thanks

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ATO Community Support

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Hi @Yellow2000

 

The reason there is little information on tax implications of a partnership with one non-resident partner is that there isn't anything it will change.

 

Under a partnership, you will still complete a partnership tax return the same way other partnerships would. All business income and expenses are reported on the partnership tax return. You then provide a statement of distribution to tell us what portion each partner received. This means you don't claim any deduction - the partnership does, and you receive the net amount for your personal return.

 

The business' income is that business' income, whether one partner spends it internationally or in Australia, whether it's spent by you or by her. You should already have a separate bank account to keep track of expenses for recording keeping. Consider having a separate one in each country if you don't already.

 

The rules for deductions for motor vehicles remain the same, no matter if that expense is in Australia or elsewhere. This goes for all your business expenses - the same deductibility rules apply, whether it's incurred in Australia or overseas.

1 REPLY 1

Most helpful response

ATO Community Support

Replies 0

Hi @Yellow2000

 

The reason there is little information on tax implications of a partnership with one non-resident partner is that there isn't anything it will change.

 

Under a partnership, you will still complete a partnership tax return the same way other partnerships would. All business income and expenses are reported on the partnership tax return. You then provide a statement of distribution to tell us what portion each partner received. This means you don't claim any deduction - the partnership does, and you receive the net amount for your personal return.

 

The business' income is that business' income, whether one partner spends it internationally or in Australia, whether it's spent by you or by her. You should already have a separate bank account to keep track of expenses for recording keeping. Consider having a separate one in each country if you don't already.

 

The rules for deductions for motor vehicles remain the same, no matter if that expense is in Australia or elsewhere. This goes for all your business expenses - the same deductibility rules apply, whether it's incurred in Australia or overseas.