You have gone into business with someone you trust. You have a partnership agreement. You have an ABN. You have started sending invoices. The business is finally moving. Then the question comes up: “Do we need to register the partnership for GST?”
It is a common question. And there is one important thing to understand from the beginning. The partnership is treated as the entity carrying on the business for GST purposes. So let’s look at how GST registration works for partnerships.
Does Every Partnership Need to Register for GST?
No. Simply being a partnership does not mean you automatically need to register for GST. For most partnerships, GST registration becomes compulsory when the partnership’s GST turnover reaches $75,000 or more.
The $75,000 threshold generally applies to the partnership’s business activities. It is not based on the personal income of the individual partners. It is also not based on the partnership’s profit.
GST Turnover Is Not the Same as Profit
This is where things can get confusing. Imagine you and your business partner run a consulting partnership.
During the year, the partnership makes: Sales: $90,000.
The partnership has expenses of: $60,000.
That leaves: Profit: $30,000.
You might think: “Our profit is only $30,000, so we are below the GST threshold.”
That’s not how GST registration works. The relevant figure is the partnership’s GST turnover, not its profit. So if the partnership’s GST turnover reaches the threshold, you need to review the GST registration requirements.
What If the Partnership Is Just Starting?
This is where you should pay attention from day one. A new partnership does not have to wait until it has actually received $75,000 in sales. Your expected turnover can also matter.
For example, you and your partner start a construction business. You secure a contract worth: $120,000. The business has only just started. You may not have received much money yet. But the expected turnover could mean the partnership needs to register for GST. So don’t wait for the bank account to tell you. Look at where the business is heading.
Can a Partnership Register for GST Voluntarily?
Yes. If the partnership is below the $75,000 threshold and is not otherwise required to register, it can generally choose to register for GST. There can be good reasons for doing this.
For example, the partnership may have significant business expenses. You might buy equipment. You might pay for advertising. You might purchase stock. If those purchases are eligible, the partnership may be able to claim GST credits.
But there is another side to voluntary registration. Once registered, the partnership generally needs to:
- Charge GST on taxable sales.
- Keep proper GST records.
- Lodge BASs.
- Account for GST collected.
- Claim eligible GST credits.
So don’t register just because someone says: “You can claim the GST back.” Look at the whole picture.
Who Is Registered for GST?
This is an important point for partnerships. The partnership itself is generally the entity that registers for GST. It is not each individual partner registering separately for the partnership’s business.
For example, John and Sarah operate a business as John & Sarah Partnership. The partnership carries on the business. If the partnership needs to register for GST, the GST registration relates to the partnership’s business activities. This is different from a sole trader, where the individual carries on the business.
What Happens After Registration?
Once the partnership is registered for GST, GST becomes part of the normal business routine. The partnership generally needs to charge GST on its taxable sales.
For example, the partnership provides consulting services for: $5,000 before GST.
GST: $5,000 × 10% = $500.
Customer pays: $5,500.
The partnership collects the $500 GST and accounts for it through its BAS.
The Partnership Can Claim Eligible GST Credits
GST works both ways. The partnership may also be able to claim GST credits on eligible business purchases.
For example, the partnership buys equipment for: $3,300 including GST.
GST included: $3,300 ÷ 11 = $300.
If the equipment is used for the business and the relevant requirements are satisfied,
the partnership may be able to claim the $300 GST credit.
This can reduce the partnership's net GST liability.
What If a Partner Pays a Business Expense Personally?
This happens quite often. One partner pays for something using their personal bank account.
For example, a partner buys office supplies for: $550 including GST. The partner then claims the amount from the partnership. The GST treatment can still need to be considered. If the expense is a legitimate partnership business expense and the relevant GST requirements are satisfied, the partnership may be entitled to the GST credit.
But don’t simply assume every expense paid by a partner personally can be claimed. Keep the invoice. Record the transaction properly. And make sure the expense actually belongs to the partnership.
What If the Partners Also Have Their Own Businesses?
This is another area where things can get confusing. Suppose two partners run a business together. One of them also operates a separate sole trader business. The partnership and the sole trader business are not automatically treated as the same business for GST purposes.
The GST treatment needs to be considered separately based on the structure and activities involved. So don’t simply combine every invoice and every sale made by the partners. Look at which entity actually made the supply. This is especially important when the same people are involved in more than one business.
What About the Partnership’s BAS?
Once the partnership is registered for GST, it generally needs to report its GST through a BAS. The BAS can include things such as: GST collected on taxable sales and GST credits on eligible purchases
For example: GST collected: $8,000.
GST credits: $3,000.
Simple net GST position: $8,000 − $3,000 = $5,000.
The partnership would generally account for its GST through the BAS.
Don’t Mix Partnership and Personal Expenses
This is particularly important when several people are running a business together. You might have one partner paying for fuel. Another paying for software. Another using a personal credit card for business purchases.It can get messy quickly.
Keep partnership expenses separate from personal expenses. Keep the invoices. Record who paid for what. And make sure the GST treatment is recorded correctly. Good bookkeeping becomes even more important when more than one person is involved.
What If the Partnership Makes GST-Free Sales?
Not every sale automatically has 10% GST. Some supplies can be GST-free. Others can be input taxed. So don’t simply add 10% to every partnership invoice. First, work out what the partnership is actually supplying.
Then determine the correct GST treatment. This is particularly important if the partnership operates in an industry where GST-free or input-taxed supplies are common.
What If the Partnership Reaches $75,000?
This is the point where you should stop and review the position. Don’t wait until the end of the financial year. GST turnover is considered under specific GST rules, including current and projected turnover.
If the partnership becomes required to register, it generally needs to register within the required timeframe. Late registration can create problems. Especially if the partnership has already been issuing invoices without GST.
A Simple Partnership Example
Let’s say you and your business partner run a cleaning business. Your partnership’s sales are: $55,000. So far, you are below the general $75,000 threshold. Then you win a new contract worth: $30,000. Your expected turnover now becomes: $85,000.
This is the point where you should review the partnership’s GST position. Don’t wait until all $30,000 has been collected. The expected turnover can matter.
The Bottom Line
Running a business as a partnership does not automatically mean you need GST registration. For most partnerships, the key threshold is $75,000 GST turnover. If the partnership is below the threshold, voluntary registration may be an option.
If it reaches, or is expected to reach, the threshold, GST registration may become compulsory. And remember: The partnership is generally the entity carrying on the business for GST purposes.
So keep the partnership’s records separate. Track its turnover. Keep its invoices. And watch where the business is heading. Because when two people are building a business together, the last thing you want is for a GST problem to become one more thing for the partners to argue about.