The NSW Supreme Court has held that s 60(1) of the Partnership Act 1892 (NSW) did not limit the liability of 2 partners (the taxpayers) to an RBA deficit debt, including the GIC, of a limited partnership.
The Commissioner established a Running Balance Account (RBA) in the name of the 3 members of the limited partnership, being one general partner (a company) and 2 limited partners (2 individuals). The tax debt involved PAYG and GST liabilities and GIC.
It was broadly argued that all the liabilities of the limited partnership would be incurred by the general partner and that they would be incurred as agent for the limited partnership for which the 2 limited partners would be jointly and severally liable to the extent of the limitation upon their liability.
The Commissioner submitted that s 444-30(1) of Sch 1 to the TAA imposed liability directly on the 3 partners ie the taxpayers and the general partner.
The Court held that in the context of the limited partnership, the liabilities in question were not imposed on the general partner with a right to call on the 2 limited partners to contribute to the liability of the partnership. It said by force of s 444-30, the liabilities were imposed on the taxpayers directly. The Court was of the view that s 60(1) of the Partnership Act did not limit the taxpayers’ liability to the RBA deficit debt, including the GIC. The Court therefore found for the Deputy Commissioner and entered judgment for the RBA deficit debt and GIC sought.
(DCT v McGuire & Anor [2013] NSWSC 184, NSW Supreme Court, Gzell J, 11 March 2013.)
[LTN 48, 12/3/13]
Extract from the TAA, Sch 1
444-30 Partnerships
(1) Obligations that are imposed under this Schedule, the * MRRT law or an * indirect tax law on a partnership are imposed on each partner, but may be discharged by any of the partners.
(2) The partners are jointly and severally liable to pay any amount that is payable under this Schedule, the * MRRT law or an * indirect tax law by the partnership.
(3) Any offence against this Schedule, the * MRRT law or an * indirect tax law that is committed by a partnership is taken to have been committed by each of the partners.
(4) In a prosecution of an entity for an offence that the entity is taken to have committed because of subsection (3), it is a defence if the entity proves that the entity:
(a) did not aid, abet, counsel or procure the relevant act or omission; and
(b) was not in any way knowingly concerned in, or party to, the relevant act or omission (whether directly or indirectly and whether by any act or omission of the entity).
Note 1: The defence in subsection (4) does not apply in relation to offences under Part 2.4 of the Criminal Code .