Tony Long & Sudan Admir run a partnership that provides IT services to businesses. The financial report for the partnership to 30 June 2023 discloses a net income of $95,000. The written partnership agreement provides that all profits and losses are to be shared equally by the partners.

The Profit & Loss Statement includes the following expenses:

Salary to Tony $105,000;
Salary to Sudan $115,500;
Interest paid to Tony $1,450 on loan to partnership to provide working capital; Interest paid to Sudan $13,600 on loan to partnership to provide working capital;
Superannuation on Tony's behalf $6,000; and
Superannuation on Sudan's behalf $8,000.

3.1 Discuss the tax treatment of payments made to partners;

3.2 Calculate the partnership's net income in accord with S90, ITAA36; and

3.3 Calculate each partner's taxable income, assuming that each partner has no other income. Also explain how this income will be taxed, assuming no offsets apply.

Answer rating: 100% (QA)

31 Tax Treatment of Payments Made to Partners 1 Salaries to Tony and Sudan Salaries paid to partners are considered business expenses and are deductib... View the full answer