Issue
Is an individual taxpayer, who is a partner in a partnership which carries on a primary production business, considered to be 'an individual who carries on a primary production business' for the purposes of Division 392 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. An individual taxpayer, who is a partner in a partnership which carries on a primary production business, is considered to be an individual who carries on a primary production business for the purposes of Division 392 of the ITAA 1997.
Facts
The taxpayer is an individual and is a partner in a partnership.
The partnership has carried on a primary production business in Australia for two or more income years in a row, the last of which is the current year.
Reasons for Decision
Division 392 of the ITAA 1997 deals with long term averaging of primary producer's tax liability.
Section 392-10 of the ITAA 1997 provides, in part, that Division 392 of the ITAA 1997 may apply to a taxpayer's assessment if: - they are an individual, and - they have carried on a primary production business in Australia for 2 or more income years in a row (the last of which is the current year).
The term 'partnership' is defined in section 995-1 of the ITAA 1997 to include 'an association of persons carrying on business as partners.'
This aspect of the definition imports the common law meaning of partnership, being the relationship which exists between persons carrying on business in common with a view to profit.
A partnership is not a separate legal identity. Each partner of a partnership is carrying on the partnership business. It follows that, where a partnership is carrying on a primary production business, each partner of that partnership is considered to be carrying on the primary production business.
Accordingly, the individual taxpayer who is a partner in a partnership which carries on a primary production business is considered to be an individual who carries on a primary production business for the purposes of Division 392 of the ITAA 1997.
The taxpayer would therefore, be entitled to the benefit of the averaging provisions under Division 392 of the ITAA 1997, if they also meet all of the other requirements of that Division.