Understanding How to Fill the Partnership Tax Return

The Partnership tax return 2026 covers the 2025–26 income year, from 1 July 2025 to 30 June 2026. A partnership that carries on a business lodges one each year.

A partnership doesn’t pay income tax itself. The return works out the partnership’s net income or loss, and the statement of distribution shows how that result is shared between the partners. Each partner reports their share in their own return and pays tax at their own rate.

Not every joint arrangement needs a partnership return. If the only income people earned together was rent from a jointly owned property, interest from a joint account or dividends from jointly held shares, each person reports their share in their individual return instead.

This guide follows the ATO’s Partnership tax return instructions 2026. Item numbers and label letters refer to the 2026 return.

Main parts of the return

1. Partnership details: TFN, ABN, name, addresses and items 1 and 2.
2. Australian income: business income and expenses at item 5, then tax withheld, distributions, rent, interest, dividends and other income at items 6 to 15.
3. Deductions: items 16 to 19, giving net Australian income or loss at item 20.
4. Foreign income: items 22 to 24.
5. Overseas transactions, personal services income, TOFA and NCMI: items 29 to 32.
6. Key financial information: items 33 to 36.
7. Business and professional items: items 37 to 53.
8. Statement of distribution: item 54.
9. Declarations.

The numbering has gaps (there is no item 3, 4 or 7), so expect the form to skip numbers.

Partnership details and items 1 and 2

Enter the partnership’s TFN, ABN and name, the current postal address, and any previous name or postal address since the last return. If the name changed because the partnership was reconstituted, attach a schedule with the dissolution and reconstitution dates, the new, continuing and retired partners, and details of the new partners.

Name the partner who should receive ATO notices. If that partner is a company, include its ABN.

Interposed entity election status: complete this only if the partners are making or revoking an election. Write the earliest income year specified, and print R to revoke. A new election or revocation also needs the Interposed entity election or revocation 2026 form.

Final tax return: answer Yes if the partnership won’t lodge again, and attach a statement explaining why and how its assets were disposed of.

Item 1: describe the main business activity precisely (“beef cattle breeding”, not “farming”) and enter the five-digit industry code at label A.

Item 2: mark the business status at labels B1 to B3 if one applies. Labels Z2 (consolidated group subsidiary), G1 (significant global entity) and G2 (country-by-country reporting entity) don’t apply to most small partnerships.

Business income and expenses (item 5)

Item 5 carries the partnership’s own Australian business income and expenses in three columns: primary production, non-primary production and totals. Start with the figures in the profit and loss statement, then make tax adjustments in the reconciliation items.

Leave GST out. Distributions from other partnerships and trusts go at item 8, and foreign income goes at items 22 and 23.

Income labels

• Labels C and D: gross payments where an ABN was not quoted, including the tax withheld. Attach a Non-individual PAYG payment summary schedule and show the credit at item 6 label T.
• Label B: gross payments subject to foreign resident withholding (foreign residents only).
• Labels E and F: assessable government industry payments, such as fuel tax credits and wage subsidies. Print D in the code box if the amount includes fuel tax credits or certain other listed payments.
• Labels G and H: other business income, such as sales and fees.

Expense labels

The expense labels are foreign resident withholding expenses (P), contractor and commission expenses (C), super (D), cost of sales (E), bad debts (F), lease expenses (G), rent (H), interest (I), royalties (J), depreciation (K), motor vehicle expenses (L), repairs and maintenance (M), all other expenses (N) and total expenses (O).

• Interest on rental property loans goes at item 9, not label I.
• Provisions for doubtful debts go at label N and are added back, because a debt must actually be bad to be deductible.
• At label L, print S for the cents per kilometre method or B for the logbook method. Print N for a motorcycle, a taxi taken on hire, a vehicle carrying one tonne or more or nine or more passengers, or where none of the partners is an individual.
• Partners aren’t employees of the partnership, so payments to them aren’t wages.

Small business entities using the simplified trading stock rules use tax values for closing stock at label E. Those using simplified depreciation show tax depreciation at label K. For 2025–26, small businesses with aggregated turnover under $10 million can immediately deduct assets costing less than $20,000 that are first used or installed ready for use between 1 July 2025 and 30 June 2026. Claim the write-off at label K and item 50 label A.

Reconciliation items and net income

The reconciliation items turn accounting profit into net income for tax purposes.

• Label A, income reconciliation adjustments: add assessable amounts missing from the accounts and subtract amounts that aren’t assessable, such as exempt income.
• Label B, expense reconciliation adjustments: add back non-deductible items such as capital expenditure, book depreciation, provisions and fines, and subtract deductions that aren’t in the accounts, such as tax decline in value.

Print L beside either label if the net amount is negative. Net income or loss from business then appears at label Q (primary production), label R (non-primary production) and label S (total).

A small business entity also shows its net small business income at label V. Individual partners need their share to claim the small business income tax offset.

Other Australian income (items 6 to 15)

Item 6 and item 8

Item 6 shows tax withheld where an ABN was not quoted (label T) and the foreign resident withholding credit (label U).

Item 8 holds the partnership’s share of income from other partnerships and trusts:

• Primary production: label A (partnership distributions), label Z (share of trust net income) and label S (related deductions).
• Non-primary production: label B (partnership distributions, less foreign income), label R (share of trust net income, less capital gains, foreign income and franked distributions) and label T (related deductions).
• Franked distributions from trusts: label F, grossed up for franking credits, with related deductions at label G.
• Credits: label C (ABN not quoted), label D (franking credits), label E (TFN amounts withheld from interest, dividends and unit trust distributions), label O (TFN amounts withheld by closely held trusts) and label U (foreign resident withholding).

Print the trust type code at labels Z and R, and attach a Trust income schedule 2026 if you report a trust distribution.

Item 9: Rent

Complete item 9 only if the rental income is part of the partnership’s business. If it is merely investment income, each owner reports their share in their own return.

Show gross rent at label F, interest deductions at label G, capital works deductions at label X and other rental deductions at label H. Label Y shows the build to rent capital works deduction at 4%. Label Y is for information only: include the amount at label X as well, and leave label Y out when working out net rent. A partnership with rental income also completes item 53 label H and item 54 label K.

Items 10 to 15

• Item 10: forestry managed investment scheme income.
• Item 11: gross interest at label J and TFN amounts withheld at label I.
• Item 12: unfranked dividends at label K, franked dividends at label L, franking credits at label M and TFN amounts withheld at label N. New Zealand franking company dividends go at item 23.
• Item 14: other Australian income at label O, such as assessable life insurance bonuses, forex gains and TOFA gains.
• Item 15: the total of items 5 to 14.

Franking credits don’t reduce tax for the partnership. They pass to the partners, who claim the offset in their own returns if they meet the holding period and related payments rules.

Capital gains

A partnership doesn’t own assets for capital gains tax purposes. Each partner holds an interest in the partnership’s assets, so when a CGT event happens, each partner works out their own capital gain or loss and reports it in their own return. Capital gains don’t appear anywhere on the partnership return, including the statement of distribution.

Deductions and net Australian income (items 16 to 20)

• Item 16, label P: expenses of earning interest and dividends. The partnership can also deduct half of any listed investment company (LIC) capital gain amount shown on a dividend statement.
• Item 17, label D: forestry managed investment scheme deductions.
• Item 18, label Q: other deductions, such as tax agent fees, gifts to deductible gift recipients and professional subscriptions. Gifts can’t create or increase a loss, and political donations can only be claimed by individuals.
• Item 19: the total of items 16 to 18.
• Item 20: net Australian income or loss.

The 2026 instructions note two changes here. The $2 minimum for deductible gifts has been removed, so eligible gifts to deductible gift recipients are deductible whatever the amount. General interest charge (GIC) and shortfall interest charge (SIC) incurred on or after 1 July 2025 are no longer deductible.

A partnership doesn’t carry losses forward. Each partner claims their share of a loss in the same year, although the non-commercial loss rules may defer an individual partner’s deduction. Some deductions belong to the partners rather than the partnership, including farm management deposits and certain primary production capital expenditure such as fencing, water facilities and landcare operations.

Foreign income and overseas transactions (items 22 to 29)

Item 22, label S asks whether the partnership had branch operations or an interest in a foreign trust, foreign company, controlled foreign entity or transferor trust. A Yes means attaching an International dealings schedule. Attributed foreign income from listed countries goes at label M and from unlisted countries at label X.

Item 23 shows gross foreign source income (label B), net foreign source income (label V), foreign income tax paid (label Z) and Australian franking credits from a New Zealand franking company (label D). Partners claim the foreign income tax offset for their share in their own returns.

Item 24 is the total of items 20 to 23, with no prior year losses included.

Item 29 covers overseas transactions:

• Label W: whether dealings with international related parties totalled more than $2 million. Add purchases and sales together rather than netting them.
• Label O: whether the thin capitalisation or debt deduction creation rules applied. The debt deduction creation rules start for income years beginning on or after 1 July 2024.
• Label D: interest paid to non-residents (also included at item 5 label I).
• Label E: royalties paid to non-residents.

A Yes at label W or O, or an amount at label D or E, requires an International dealings schedule 2026.

Personal services income (item 30)

Personal services income (PSI) is income mainly earned from an individual’s personal efforts or skills. At label N, answer whether the partnership’s income included any individual’s PSI. If so, show the PSI amount at label A and related deductions at label B, then work through the personal services business tests:

• Label C: the results test.
• Label D: whether a personal services business determination is held.
• Labels E1 to E3: the unrelated clients, employment and business premises tests, which only count when less than 80% of the individual’s PSI comes from one source.

If the PSI rules apply, the net PSI is attributed to the individual who earned it, and you adjust for it in the item 5 reconciliation items.

Financial and business information (items 31 to 53)

• Item 31: TOFA gains (label M) and losses (label N).
• Item 32: non-concessional MIT income (NCMI) and amounts excluded from NCMI, at labels A to L.
• Items 33 to 36: current assets (label F), total assets (label G), current liabilities (label I) and total liabilities (label J).
• Items 37 and 38: business name and address.
• Items 39 to 41: opening stock (label C), purchases (label B) and closing stock (label D).
• Items 42 and 43: trade debtors (label E) and trade creditors (label H).
• Item 44, label L: salary and wages for employees. Amounts paid to partners don’t belong here.
• Item 45, label M: payments to associated persons, such as partners’ relatives, but not partners.
• Item 46, label T: fringe benefit employee contributions.
• Item 47: the election to value obsolete trading stock below cost.
• Item 48, label U: the aggregated turnover range, if the partnership or a partner relies on it for the instant asset write-off, small business CGT concessions or small business restructure roll-over.
• Item 49: capital allowances. Small businesses using simplified depreciation skip to item 50.
• Item 50: simplified depreciation, with the instant asset write-off at label A and the general small business pool at label B.
• Item 51, label F: National Rental Affordability Scheme (NRAS) tax offset.
• Item 53: net financial investment income or loss (label G) and net rental property income or loss (label H), which partners need for their income tests.

Statement of distribution (item 54)

Complete a statement for every partner, with their name, address, TFN, and date of birth (individuals) or ABN (non-individuals). If a partner is a trustee, show the trust’s name and TFN.

The statement covers only the Australian income or loss from item 20. Capital gains, attributed foreign income, foreign source income, foreign income tax offsets and the early stage investment offsets are left out, and each partner reports them in their own return.

Show whole dollars except at label I, and print L beside a loss.

Label M, the share of exploration credits, has been removed from the 2026 statement. The Junior Mineral Exploration Incentive ended on 30 June 2025, so exploration credits can’t be received or claimed from 1 July 2025.

Real and effective control: further tax is payable by a partner aged 18 or older at the end of the income year who doesn’t have real and effective control and disposal of their share of the net income.

Partners carry their shares into their own returns: individuals at item 13 of the supplementary tax return, companies at item 6 and trusts at item 8.

The ATO has removed the system limits on statements of distribution in SBR-enabled and practitioner lodgement software. Only paper returns with more than three partners need photocopied distribution pages.

One partner signs the taxpayer’s declaration. If a tax agent prepares the return, the agent also signs the tax agent’s declaration.

Schedules and attachments

The 2026 instructions list three schedules for partnerships:

• International dealings schedule 2026: needed for attributed foreign income, interest or royalties paid to non-residents, thin capitalisation or debt deduction creation rules, or international related party dealings over $2 million.
• Trust income schedule 2026: needed if the partnership reports a trust distribution.
• Non-individual PAYG payment summary schedule: needed for amounts at item 5 labels C, D or B, or item 6 labels T or U.

Answer Yes to “other attachments” if you attach anything else, such as a final return statement. If a required schedule is missing, the ATO may not treat the return as lodged in the approved form.

How it differs from a company tax return

If you have completed a company tax return, much of the partnership return will look familiar. The main differences:

• No tax is calculated: a partnership’s result flows through to the partners.
• Losses: a company can carry forward tax losses, while a partnership loss goes to the partners in the year it arises.
• Capital gains: partners report their share of partnership capital gains in their own returns.
• Credits: franking credits and amounts withheld pass to the partners through the statement of distribution.
• People: partners can’t be employees of their partnership.

Lodgement and record keeping

You can lodge through SBR-enabled software, through a registered tax agent or on paper.

If the partnership lodges itself, the return and schedules are due by 31 October 2026. Partnerships using a registered tax agent may have a later due date under the agent’s lodgement program. These dates vary with each client’s circumstances, so confirm the date with your agent. If you can’t lodge on time, contact the ATO before the due date.

Keep supporting records rather than attaching them to the return. These include distribution statements from other partnerships and trusts, interest and dividend statements, and any ATO worksheets you used. Some records, such as bad debt statements, must be kept for five years, and longer in some cases.

Preparing a partnership return in Lodgeit

Lodgeit prepares and lodges the Partnership tax return through SBR, with the ATO’s validation and prefill services. The Preparation of Partnership Tax Return (PTR) help guide covers the full workflow. In short:

1. Gather the profit and loss statement, balance sheet, distribution statements, interest and dividend statements, and each partner’s details and share.
2. Connect Lodgeit to the ATO.
3. Import the financials from Xero, MYOB or QuickBooks, or use the free Excel template if the partnership has no accounting software.
4. Map the accounts. Lodgeit maps most accounts automatically, and in later years you only review new accounts.
5. Add the Partnership tax return form, choose the year and activate the sections you need.
6. Enter the tax figures for interest, dividends and distributions, as shown in reporting partnership interest, dividend, trust and rental income.
7. Review the reconciliation section, which shows how each tax figure is reached from the accounts.
8. Complete the statements of distribution, check the form status on the dashboard, get the partner’s signature and lodge.

Read more on the Partnership tax returns page.

This guide is general information, so check the current ATO instructions or ask a registered tax agent about your specific circumstances.