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What are the main types of partnerships?

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What are the main types of partnerships
What are the main types of partnerships

There are three types of partnerships. The partnership type you choose will depend on what best suits the partners involved.

General Partnership (GP)

All partners involved will be equally responsible for the management of the business. Each member has unlimited liability (personally liable) for the debts and obligations that the business incurs.

Limited Partnership (LP)

Liability of partners is limited to the amount of money they contributed to the partnership. Limited partners tend to be ‘passive’ investors who don’t play a role in the day to day management of the business.

Incorporated Limited Partnership (ILP)

ILP partners have limited liability for the debts of the business. However, there must be at least one partner with unlimited liability. If the business is failing to meet its obligations, then the general partner (or partners) will become personally liable.

Choose a business by discussing what and how each partner can contribute. Based on this, choose a structure which accommodates these differences.

Pension from your SMSF fund

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Pension from your SMSF fund
Pension from your SMSF fund

SMSF funds can provide pension or lump sum benefits during retirement. Retirement is a condition of super release if you have reached your preservation age. Depending on your date of birth, your preservation age will be between 55 and 60. The benefits from your super are tax-free once you are over the age of 60.

If you plan to start a super pension income stream, then the funds from your accumulation account need to be transferred to your retirement account to fund your pension. Your retirement account has a cap of $1.6 million, so you can transfer that amount as a lump sum but no more. The earnings on these funds are tax-free.

Each year, you need to withdraw a minimum percentage of your account balance from the retirement fund. This minimum percentage will depend on your age.

Alternatively, you can start your Transition-to-retirement pension if you have reached your preservation age but you are still working. However, unlike the funds that support your super pension once you begin retirement, these are taxed at 15%.

Trustees and beneficiaries registering for tax in trusts

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Trustees and beneficiaries registering for tax in trusts
Trustees and beneficiaries registering for tax in trusts

Trusts have their own tax file number (TFN) that should be used to complete tax returns. Trusts are also able to apply for an Australian business number (ABN) on the condition that the trust is carrying on an enterprise. If a trustee applies for a TFN or ABN, then this is in the capacity of a trustee and is separate from any other registration the trustee may require for other capacities.

Trustees

The trustee is responsible for managing the tax affairs associated with the trust. This includes registration of the trust in the tax system, lodgement of trust tax returns, as well as paying certain tax liabilities.

Beneficiaries

For beneficiaries, their share of the trust’s net income is included in their tax returns. Further, payments on the expected tax liability may need to be made, for which the pay as you go (PAYG) instalment system can be used.

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