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Instalment income from a partnership

If you are a partner in a partnership, to work out your PAYG instalments you may need to calculate how much instalment income you receive from the partnership.

Last updated 8 March 2022

If you are a partner in a partnership, to work out your pay as you go (PAYG) instalments you may need to calculate how much instalment income you receive from the partnership.

Do you need to calculate your instalment income?

You need to calculate your share of a partnership's instalment income if all the following apply:

• you are a partner in a partnership
• you receive income from the partnership
• you pay PAYG instalments using the instalment rate (option 2 on your activity statement).

You do not need to calculate your instalment income if you pay PAYG instalments using the instalment amount we give you (option 1 on your activity statement or instalment notice). You can simply pay the amount we have calculated for you.

Calculating your share of partnership instalment income

Instalment income is gross ordinary income, excluding GST.

You can calculate your share of the partnership's instalment income using the formula (A ÷ B) × C, where:

You can find A and B in the partnership's most recently lodged tax return. These amounts need to be updated when either:

• a future tax return is lodged for the partnership
• the most recent partnership tax return is amended.

There may be times when the result of the formula is zero. For example, this would happen if the partnership incurred a loss in an earlier year. In these cases, you must estimate a fair and reasonable amount of your current instalment income from the partnership.

If you are a partner in more than one partnership, you need to include amounts for each partnership.

Your assessable income from the partnership for the last income year

This amount is shown on the partnership's tax return at item 53 (labels B).

Partnership's instalment income for the last income year

This is generally the partnership's gross ordinary income. It is the total of the amounts shown on the partnership's tax return at:

• Item 5: Total business income (labels G and H)
• Item 8: Distribution from partnerships (labels A and B only) and Distribution from trusts (labels Z, R and F only)
• Item 9: Gross rent (label F only)
• Item 10: Forestry managed investment scheme income (label Q)
• Item 11: Gross interest (label J only)
• Item 12: Dividends received (labels K and L only)
• Item 14: Other Australian income (label O)
• Item 23: Other assessable foreign source income (label B only)
• Item 31: Taxation of financial arrangements (TOFA). If the partnership is a TOFA entity, then:
• if TOFA gains (label M) are greater than TOFA losses (label N), subtract the TOFA losses (label N) from the sum of the labels
• if TOFA losses (label N) are greater than TOFA gains (label M), subtract TOFA gains (label M) from the sum of the labels.

Partnership's instalment income for the current period

You can get this amount from the partnership's records for the current period.

The 'current period' is the quarter or other period for which you are paying the PAYG instalment.

Example: working out a share of a partnership's instalment income

Bob earns income from investments. He is also a partner (with his wife) in a farming business that is registered for GST.

Bob is required to pay PAYG instalments. He has chosen to pay using option 2 (instalment rate × instalment income) and we have notified him of an instalment rate.

Bob needs to work out his share of instalment income from the partnership.

To use the formula (A ÷ B) × C, Bob needs to know:

• A: his assessable income from the partnership for the last income year
• B: the partnership's instalment income for the last income year
• C: the partnership's instalment income for the current period.

Bob's assessable income from the partnership is shown at item 53 of the partnership's tax return for the last income year. Bob records the sum of labels A + B. In Bob's case this is \$8,900.

The partnership's instalment income for the last income year is also shown in its tax return. Bob totals the amounts shown at:

• Item 5 Business income: For Bob, the amount at label G (Other business income) is \$50,000.
• Item 8 Partnerships and trusts, labels A and B (partnerships) and Z, R and F (trusts): zero.
• Item 9 Rent, label F (Gross rent): \$11,000.
• Item 10 Forestry managed investment scheme income, label Q: zero.
• Item 11 Gross interest including Commonwealth Government loan interest, label J: \$163.
• Item 12 Dividends, labels K and L: zero.
• Item 14 Other Australian income, label O: zero.
• Item 23 Other assessable foreign source income, label B: zero.
• Item 31: TOFA: zero.

Therefore, the total partnership instalment income for the last income year is:

• \$50,000 + \$11,000 + \$163 = \$61,163

The partnership's instalment income for the current period is \$47,500. This includes the sale of livestock and contract income.

Bob's proportion of the partnership's instalment income for the quarter is:

• (\$8,900 ÷ \$61,163) × \$47,500 = \$6,911

Bob adds this amount to his investment income to works out his total instalment income for the period.

End of example

Once you have calculated your share of the partnership's instalment income: