Where a partnership is issued with exploration credits in an income year they may pass the exploration credits to their members. To be entitled to benefit from exploration credits, the members must be an Australian resident for the whole of the income year.
Additionally, the Partnership must be an Australian partnership for the whole of the income year. The ATO has not provided a return label to collect Exploration credits received by the partnership and the following screen is provided to assist with the collection of any such credits received, either as a share of exploration credit from another small business Partnership or small business trust or directly from the issuing Greenfields mining and mineral company in lieu of a franking credit.
Enter Y at the quick access point to open the Exploration credits worksheet (exc) which once the Australian resident partnership question has been answered, will provide integration from the Distributions from partnerships worksheet (dip) and the Distributions from trusts worksheet (dit) and a free field to enter those exploration credits received directly from the issuing company.
The total of the Exploration credits will be passed to Label M in the Distribution statement worksheet (xP).
From 1 July 2016, the partnership may receive a share of:
Early stage venture capital limited partnership tax offset;
Early stage investor tax offset; or
Credit for foreign resident capital gains withholding amounts.
As with the Exploration credits, the ATO has not provided fields at the Distribution from partnerships and Trusts item 8 and for these new offsets/credits, there are no labels in the Distribution Statement to distribute any such amounts received by the partnership from another partnership or a trust. MYOB has therefore provided fields for this purpose. It is important to note that they are provided purely for distributing to Partners: they are not output or transmitted for PLS lodgment.
The following CCH links will provide information of these new incentives, and the FRWCG foreign resident withholding capital gains rules.
CCH References
20-700 Outline of innovation incentives
22-072 Capital gains withholding regime for foreign residents
The Income or Loss to be distributed
The income or loss available for distribution is the Net Australian income or loss at label $ item 20.
The income or loss must be distributed to partners in accordance with the percentage holding of each partner.
In the Distribution worksheet (xP) enter each partner's percentage share in the partnership. Once all partner details have been entered, click Distribute or [F8] and Tax will separate the income or loss types and the credits and will distribute these to those partners whose returns are in the Tax ledger.
If the following persons or entities are partners, and the partnership claimed a deduction in respect of a listed investment company (LIC) capital gain amount, the partnership must advise these partners of their share of the deduction claimed by the partnership for the LIC capital gain amount:
Non-resident individual
Trustee of a trust
Trustee of a superannuation entity
Company (including a life insurance company), and
Partnership.
Completing the statement of distribution
If the return has been rolled over from the prior year, only some of the partners' details will have rolled over. This is due to the reformatting of the distribution statement by the ATO with effect from 1 July 2014 and the introduction of date of birth and home address fields for an individual and ABN and Business address fields for non-individual entities.
Due to these changes, you will need to reselect the partners’ details in the 2015 distribution statement (xP) so that:
The date of birth and home address are pre-filled for an individual, and
The ABN and Business address are pre-filled for a non-individual entity.
The address field has been relabelled to clarify the type of address that should be provided (residential for an individual or business for a non‐individual). Where you also prepare the partners’ tax returns using MYOB Tax, the following addresses will be pre-filled to the Statement of Distribution fields from the:
Individual Return: Home address on the front cover.
Company Return: Business address on the front cover.
Trust/Partnership Returns: Business address of main business at item 37.
For each partner's individual statement of distribution show:
Individual name or non-individual name
Residential (home) or non-individual business address
Date of birth and
Tax file number
ABN of non-individual partner
Validation tests will ensure that the correct fields are completed
A new field has been introduced to the xP so that any partner, 18 years or older at June 30 who does not have real or effective control over their share of the income of the partnership, can be dealt with more efficiently. The checkbox should only be ticked if the question were to be asked and the answer is 'yes’.
Labels included in this tab are:
Label A - Share of income, Primary production and Label B - Share of income, Non-primary production
Show each partner's share of primary production income and non-primary production income in whole dollars. If a loss is distributed precede the amount with a negative. While the partnership's non-primary production income includes franked distributions, for the purposes of recording partners' franked distributions in the distribution statements, franked distributions should be shown at label L.
The amount of primary production income in the distribution statement (Label A) is greater than the net primary production income received - net primary production income (Item 5 Label Q) plus primary production distribution from partnerships (Item 8 Label A) plus primary production share of net income from trusts (Item 8 Label Z) less primary production deductions relating to amounts shown at A and Z (Item 8 Label S).
Label C - Credit for tax withheld where ABN not quoted
Show each partner's share of credit for amounts withheld where an ABN was not quoted. Show whole dollars only. The total distributed must equal the sum of any credit claimed at:
T item 6Tax withheld where ABN not quoted, and
C Share of credit for tax withheld where ABN not quoted item 8.
Label L - Franked distributions
Show each partner's share of franked distributions (also described as franked dividends or attributable franked distributions) and its share of the franking credits referable to those franked distributions (the franking credit 'gross-up'). These amounts are shown in whole dollars.
The net Australian income/loss amount (Item 20 Label $) is not equal to the sum of primary production income plus non-primary production income plus franked distributions in the distribution statement (Labels A, B and L).
Label D - Franking Credit
Show each partner's share of franking credit for franked dividends. The total distributed must equal the sum of franking credits claimed at:
D Share of franking credit from franked dividends item 8, and
M Franking credit item 11.
Label E - TFN amounts withheld
Show each partner's share of credit for amounts withheld from payments of interest, dividends and unit trust distributions by investment bodies because the recipient did not quote a tax file number (TFN). The total distributed must equal the sum of TFN amounts withheld on interest, dividends and unit trust distribution at:
E Share of credit for TFN amounts withheld from interest and dividends item 8,
I TFN amounts withheld from gross interest item 10, and
N TFN amounts withheld from dividends item 11.
Label O - Share of credit for TFN amounts withheld from payments from closely held trusts
Show at O the share of the net amount of TFN amounts withheld by a trustee of a closely held trust, which is subject to the TFN Withholding rules. The total distributed must equal the amount reported at Item 8, label O and the amount of credit claimed by each partner should be claimed in proportion to their partnership interest.
Credits for the TFN amounts withheld may be claimed by the partners when they lodge their income tax returns.
For more information regarding the TFN withholding rules for closely held trusts. Refer to the ATO website for the publication TFN withholding for closely held trusts - Who is affected?
Label F - Credit for tax withheld - foreign resident withholding (excluding capital gains)
Show each partner's share of credit for amounts withheld under foreign resident withholding (excluding capital gains) - FRW. Show whole dollars only. The total distributed must equal the sum of TFN amounts withheld on interest, dividends and unit trust distribution at:
U Credit for tax withheld Foreign resident withholding (excluding capital gains) - item 6
U Share of credit for tax withheld from foreign resident withholding (excluding capital gains) - item 8
Label G - Australian franking credits from a New Zealand company
Show each partner's share of Australian franking credits that were attached to franked dividends received from a New Zealand company either directly or indirectly through another partnership or trust.
Australian franking credits from a New Zealand franking company in the distribution statement (Label G) cannot be greater than Australian franking credits from a New Zealand franking company (Item 23 Label D).
This amount is not necessarily the total amount that can be claimed by each partner. This is because under section 205-405 of the Income Tax Assessment Act 1997, each partner's share of franking credits should be reduced by the amount of any share of supplementary dividend paid by the New Zealand company if:
The supplementary dividend was paid in connection with the franked dividend, and
The partner is entitled to a Foreign income tax offset because the franked dividend is included in their assessable income. Refer to Appendix 1.
If the above conditions exist, the reduction should be made in the partner's own tax return.
Label H - Share of net small business income
Show each partner’s share of the net small business income at label H. The total of the amounts shown.
Label I - Share of National rental affordability scheme tax offset
Show each partner's share of the National rental affordability scheme tax offset. The total of the amounts distributed must equal the amount of National rental affordability scheme tax offset entitlement shown at item 49, label F on the partnership income tax return. Include cents.
Label J - Share of net financial investment income or loss
Show each partner's share of Net financial investment income or loss at label J The total of the amounts distributed must equal the amount of Net financial investment income or loss shown at item 50, label G on the partnership income tax return.
Label K - Share of net rental property income or loss
Show each partner's share of Net rental property income or loss at label K. The total of the amounts distributed must equal the amount of Net rental property income or loss shown at item 50, label H on the partnership income tax return.
Label M - Share of exploration credits
Show each partner’s share of exploration credits at label M.
CCH References
5-000 A Partnership for Income Tax Purposes
5-030 Return and Payment of Tax
5-060 Changes in membership of a partnership
5-110 Treatment of Partnership Losses
5-120 Partnership Exempt Income
5-130 Income and deductions of partner
Name of partner 18 or over with no real and effective control
If any partner 18 years of age or older at 30 June of the current income year does not have real and effective control over their share of income, their names must be provided at this item.
If such a partner, as described above, does not, at 30 June of the current income year, have real and effective control and disposal of part of the whole of their share of partnership net income, the partner pays further tax - refer to section 94 of the ITAA 1936.
Real and effective control depends on the constitution and control of the partnership, its management, and the actual conduct of its operations. Broadly, a partner lacks the real and effective control if, because of any of the matters mentioned in the preceding sentence, he must allow his share to be dealt with in a particular way so that he cannot, of his own will, deal with it in another way. See section 94 of the ITAA 1936.
Under special circumstances the Commissioner may treat a partner as having real control of a share or part of a share of partnership income. If it is considered that this discretion is exercised, provide full details in support of the request.
CCH References
5-180 Uncontrolled Partnership Income
5-190 Effective control
There are no label definitions for these three offsets/credits:
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