Partnerships and transfer duty

You must pay transfer duty on certain transactions that affect partnerships that hold dutiable property. For example, if you acquire a partnership interest in a partnership that has Queensland business assets (a business licence, work in progress, trade debtors, goodwill, etc.), you may have to pay transfer duty.

Acquiring a partnership interest

You can acquire a partnership interest when:

  • a partnership is formed
  • the members of a partnership change
  • 2 or more partnerships merge
  • your interest increases under the terms of the partnership agreement.

Determining the value of your partnership interest

To work out the value of your partnership interest, apply the percentage of your interest in the partnership to the unencumbered value of the dutiable property, including indirect interests, held by the partnership.

Your partnership interest may be any of the following values:

  • the percentage of the value of your entitlement
  • the profit-sharing percentage that you acquired when you became a partner or when your interest in the partnership increased
  • the percentage of the partnership capital that you contributed or are obliged to contribute - whichever is greater
  • the percentage of the partnership losses that you will carry.

If your partnership interest increases, transfer duty applies to the increase only. You don't include the value of any dutiable property that you contributed to the partnership when it was formed.

Example

Three people are partners in a business. One partner retires from the partnership and a new partner joins. The new partner is acquiring a one-third partnership interest. The dutiable property of the partnership, including goodwill, is independently valued at $300,000.

Transfer duty is charged on the value of the one-third interest in the partnership, which is $100,000.

Valuing goodwill

Legal goodwill is different to accounting goodwill.

Some partnership agreements are structured so that goodwill is not recognised at the time of a partner joining or leaving. However, how a partnership is structured and whether partners choose not to recognise goodwill does not change the fact that it may exist. Where it does, it needs to be quantified for assessment.

The case of Commissioner of Taxation (Cth) v. Murry [1998] HCA 42 is the leading authority on legal goodwill.

Calculating duty

To calculate duty on a partnership acquisition, use the transfer duty rates on the higher of the:

  • consideration for the partnership acquisition (to the extent that it relates to dutiable property)
  • value of the partnership interest (including goodwill).

A family business concession is available for some transactions involving family partnerships.

Lodging the documents

If you enter into a dutiable transaction involving a partnership interest, you must have the relevant documents assessed for transfer duty and stamped.

You need to lodge the following documents with the Office of State Revenue within 30 days of the transaction documents being signed. Where practical, all transaction documents relating to the same partnership should be submitted together.

  • For dutiable transactions on formation of a partnership:
    • the partnership agreement
    • a dutiable transaction statement (Form D2.2)
    • an identity details annexure for each non-Australian transferor and transferee, when transferring real property (e.g. houses, apartments, business premises and vacant land)
    • a valuation for any dutiable property that is acquired by a partner
    • a covering letter
      • advising if any of the partners are acquiring dutiable property previously owned by one of the other partners (for example, land or plant and equipment)
      • outlining the documents you have lodged, your name and return address.
  • For other dutiable transactions involving a partnership:
    • the original partnership agreement
    • details of the partners, their respective shares and arrangements for profit sharing and distribution of assets when winding up (if a partnership agreement has not been executed)
    • a dutiable transaction statement (Form D2.2)
    • an identity details annexure for each non-Australian transferor and transferee, when transferring real property (e.g. houses, apartments, business premises and vacant land)
    • balance sheets of the partnership before and after the transaction
    • a valuation of all the assets of the partnership (including goodwill), supported by financial statements for the previous 3 years
    • details of any liabilities being taken over
    • a covering letter outlining the documents you have lodged, your name and return address.

If you apply for the concession on an acquisition in a family partnership, you need to also lodge a family business concession claim (Form D2.5).

Find out more about lodging documents for an assessment of transfer duty.

Also consider...

Contact

Office of State Revenue

  • Call 1300 300 734 (Australia) or
    +61 7 3179 2500 (overseas)
  • Send an email using our online enquiry form.