The ATO on Wed 5.11.2014, issued an Addendum to Taxation Ruling TR 2005/7 (The taxation implications of “partnership salary” agreements).
It amends the Ruling to include the taxation consequences of a partner’s salary where the partnership is a corporate limited partnership. As a consequence, the ATO has also withdrawn ATO ID 2002/564 (Partner Salary in A Corporate Limited Partnership).
[FJM Note: In this Addendum, the Commissioner rules that a Corporate Limited Partnership (‘CLP’) is no different to an ordinary partnership, in that the ‘salary’ is not deductible to the partnership, being just an agreement to vary the profit distribution in favour of the recipient. As a result, the payment of the salary cannot create or increase a loss. The corollary to this is that the ‘salary’ is not assessable to the recipient, to the extent that it and the other profit distribution exceeds that year’s profit. The only difference for a CLP is that the profit distribution is deemed to be a ‘dividend’ that is assessable under s44 of the ITAA36.)
[LTN 214, 5/11/14]