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On a partnership tax return, how should capital contributions by partners be indicated?

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When forming a partnership, and throughout the course of its business operations, it is common for partners to contribute capital to the partnership's bank account(s) for the purpose of carrying on the partnership business. Likewise, monetary advances are from time-to-time made by one or more partners which increase the liquid assets of the business but do not represent an increase in capital of those partners (subject to specific partnership agreements, of course).

For the purposes of the Partnership Tax Return 2021 (NAT 0659), would monetary contributions made by the partners directly to the partnership's bank account(s) be classified as income? And if so, would it be classified as 'Other Business Income (Non-Primary Production)', or something else?
Further, would contributions made by the partners throughout the financial year which remain in the partnership's bank account(s) as of EOFY count as 'Current Assets' (and thus also as 'Total Assets')?

Thanks in advance!

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ATO Certified Response

ATO Community Support

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Hi @death_n_taxes,

 

When you've put funds into your business as capital, it's generally not assessable income and doesn't need to be included in your reporting (> money you contribute as the business owner)

 

Generally, if you contribute capital to your business it would increase your share of equity in the business, or otherwise become a loan from the business to you, and outside the scope of taxable income.

 

The monetary contributions aren't business income, don't report them at any income labels on the partnership return.

 

The monetary contributions remaining in the partnership bank account at EOFY would be "cash on hand" for the business. Report the EOFY amount at Current Assets and as part of Total assets

 

1 REPLY 1

Most helpful response

ATO Certified Response

ATO Community Support

Replies 0

Hi @death_n_taxes,

 

When you've put funds into your business as capital, it's generally not assessable income and doesn't need to be included in your reporting (> money you contribute as the business owner)

 

Generally, if you contribute capital to your business it would increase your share of equity in the business, or otherwise become a loan from the business to you, and outside the scope of taxable income.

 

The monetary contributions aren't business income, don't report them at any income labels on the partnership return.

 

The monetary contributions remaining in the partnership bank account at EOFY would be "cash on hand" for the business. Report the EOFY amount at Current Assets and as part of Total assets