How Partnership Income Affects Your Personal Tax Return—What You Need to Know

Gotax Publishing – 8 October 2025

Your Partnership Income Isn’t Just Shared—It’s Taxed

Running a business in partnership means sharing the profits. But when it comes to tax time, that income doesn’t just sit in the partnership—it flows straight into your personal tax return. And if you don’t report it correctly, you could face ATO penalties, missed deductions, or a reduced refund.

Here’s what most Aussie partners don’t realise: the partnership doesn’t pay tax. You do. And how that income is treated on your personal return can make or break your tax outcome.

Let’s break down how partnership income affects your individual tax return—and how Gotax helps you get it right.

The Flow of Income: From Partnership to Personal Return

A partnership lodges a Partnership Tax Return with the ATO. This return reports the business’s income, expenses, and net profit or loss. But the partnership itself doesn’t pay tax.

Instead, the net income is split between the partners based on the partnership agreement (or equally if no agreement exists). Each partner then reports their share on their individual tax return.

That means:

• You pay tax on your share of the partnership’s net income
• You may be eligible for deductions and offsets based on that income
• You must include any distributed credits (e.g. franking credits, foreign income)

Gotax ensures your personal return reflects your partnership income accurately and completely.

What You Must Include in Your Personal Tax Return

When preparing your individual return, you must include:

• Your share of the net income or loss from the partnership
• Any capital gains or losses passed through the partnership
• Your share of franking credits, foreign income, or tax offsets
• Any non-commercial losses if the partnership ran at a loss
• Personal deductions not claimed at the partnership level (e.g. superannuation, work-related expenses)

Gotax prompts you for every item—so nothing gets missed.

How Partnership Income Affects Your Taxable Income

Your share of partnership income is added to your other income sources—salary, investments, rental income, etc.—to calculate your total taxable income.

This can:

• Push you into a higher tax bracket
• Affect your eligibility for offsets and rebates
• Impact your Medicare levy
• Influence your HELP/HECS repayment threshold

Gotax calculates the impact and helps you plan smarter.

What If the Partnership Made a Loss?

If your partnership ran at a loss, you may be able to offset that loss against other income—but only if you meet the ATO’s non-commercial loss rules.

These rules consider:

• Your income from other sources
• The nature of the business
• Whether the business has made a profit in recent years
• Whether you meet the ATO’s activity tests

Gotax checks your eligibility and applies the correct treatment automatically.

Common Mistakes Partners Make

1. Forgetting to Include Partnership Income

If you lodge your personal return without including your partnership share, the ATO will flag it—and you could face penalties.

2. Misreporting Income Splits

Your share must match the partnership’s distribution statement. If it doesn’t, your return is incorrect.

3. Missing Personal Deductions

Some deductions—like super contributions and work expenses—don’t appear in the partnership return. You must claim them personally.

4. Ignoring Loss Rules

Claiming a partnership loss without meeting the ATO’s criteria can trigger an audit.

Gotax helps you avoid every trap—and claim every dollar.

Real-World Example: The Refund That Got Missed

Jess and Mike run a landscaping partnership. The business made $80,000 profit, split 60/40. Jess lodges her personal return but forgets to include her $48,000 share. The ATO flags the mismatch, issues a penalty, and delays her refund.

Gotax would’ve caught that—and lodged it correctly.

How Gotax Makes It Easy

• Dual Lodgement Support – We handle both the partnership and personal returns
• ATO-Compliant Calculations – Income splits, deductions, and credits are calculated correctly
• Smart Deduction Finder – We prompt you for personal deductions that often get missed
• Non-Commercial Loss Checks – We apply the ATO’s rules automatically
• Real Aussie Experts – Gotax isn’t just software. We’ve got tax pros ready to help

Don’t let your partnership income derail your refund. Lodge smarter with Gotax.

FAQs

Do I need to include partnership income in my personal tax return?
Yes. The partnership doesn’t pay tax—you do. Your share must be included in your individual return.

What happens if I forget to include it?
The ATO will flag the mismatch and may issue penalties or delay your refund.

Can I claim deductions not listed in the partnership return?
Absolutely. Personal deductions like super contributions and work expenses are claimed on your individual return.

What if the partnership made a loss?
You may be able to offset the loss—but only if you meet the ATO’s non-commercial loss rules.

Does Gotax handle both returns?
Yes. We specialise in partnership and personal tax returns—accurately, quickly, and with maximum refund potential.

Final Thoughts: Your Refund Depends on Getting This Right

Partnership income isn’t just a line item—it’s a tax liability. And if you don’t report it correctly, your refund could vanish.

Gotax makes it easy. We guide you through both returns, apply the correct rules, and ensure nothing gets missed.

Don’t let your partnership income cost you. Use Gotax to claim it right.

Disclaimer

This blog is an information source only. Make sure you seek professional advice, like Gotax, before you act on its contents.