Question

Mrs Kely Hoppen is a well-known Australian Interior Designer. She has entered into a partnership with her husband, but they have no written partnership agreement. Mrs Kely Hoppen performs all the decorating work and all receipts and business documents are only in her name. Any cheques received are made out in her name, but they are deposited into a joint bank account. This account is used by both Mr and Mrs Hoppen and is used for household and business outgoings. Mr Hoppen helps in the business by taking phone calls from clients and suppliers. Mrs Kely Hoppen believes that she and her husband are in a taxation law partnership and that she acts for the partnership.

Advise Mrs Kely Hoppen as to whether she and her husband are in partnership. You must refer to relevant legislation and/or case law in your answer.

Answer 1

To Advise whether Mrs. Kely Hoppen and her Husband are in Taxation law or not :-

• A partnership is an association of persons carrying on a business as a partner or receiving income jointly including husband & wife Partnership.
• A partnership is not a taxable entity, but it must lodge a tax return at the end of each income year.
• Partners are taxed on their share of profits of the partnership or are entitled to a deduction for their share of the losses incurred by the partnership as disclosed in their own tax return.
• In western Australia, Partnerships are governed by Partnership Act, 1895.
• There are basically two types of partnership i.e General & Limited.

There are basically three necessary elements to be a partnership between two or more :-

• Carrying on a business
• In common &
• With a view to earn profit.

Normal or General Partnerships in Australia :-

• Normal or General Partnerships are the simplest kind of partnership to make because they do not need to be registered with OSR Fair Trading and the partners of the partnership do not need to have a written partnership agreement between them.
• Because of this,the partnership act 1963,specifies the factors that are relevant in determining whether a partnership exist.
• For ex:- If a person receives a share of the profits of a business, that is evident that they are in partnership business.
• There are other factors to be taken into account like, whether property is held jointly, or money has been loaned between two persons where one carries on a business are both relevant to the question of whether partnership exist.

So, from above explaination we can conclude that Mrs. Kely Hoppen and her Husband are in partnership as following conditions gets satisfied :-

• Joint Bank Account in name of both of them.
• Mr. Hoppen is helping her in the bsuiness by taking phone calls.
• Though there is no written agreement, there partnership is said to be Normal or General Partnership.