Documents required to assess a partnership 043-03120020

All necessary financial documents should be requested by Service Officers and forms issued at first contact with a customer. The Service Officer should explain why these documents are required.

Customers have to provide authorisation to Services Australia before their accountant can be contacted directly, and the customer and their accountant should be advised that the agency has authority under Social Security Law to collect relevant information, and that the agency will not meet any costs associated with the provision of this information.

The following documents may be required.

Business Details form (MOD F):

• This is a Services Australia form, that is completed by the customer, which:
• enables identification of the type of business the customer is involved in
• assists in determining eligibility for activity tested payments and payments with mutual obligation requirements
• advises whether the business is continuing to operate

Real Estate form (MOD R) and local council rates notice for each property owned by partnership:

• The MOD R is the Services Australia form which asks questions relating to the type, ownership and value of real estate assets. The rates notice has the relevant details of the property identification, for example, Lot and DP numbers required for a valuation. Note: if the property is larger than 2 hectares a rural property questionnaire is required for more details
• The MOD R is required to:
• Gather information necessary for the assessment of the value of a property
• Show if any income is derived from the property (that is, is it rented)
• Profit and loss statement
• Balance sheet
• Depreciation schedule
• Livestock Trading Account
• Income tax returns (ITRs)
• The customer’s ITR and the partnership ITR must be obtained. Although partnerships lodge tax returns, the partnership itself does not pay any tax. A partnership ITR shows:
• The partnership's income from all sources
• A list of business expenses and deductions, some of which may not be allowable under Social Security Law (Note: the income tax return may not include sufficient expense details so a profit and loss statement will still be required)
• For multiple properties owned by the partnership – a separate profit and loss statement must be provided for each property
• A Statement of Distribution will generally be attached to the partnership ITR which indicates the share of the profit or loss for each member of the partnership
• Show how the profit or loss of a partnership is split amongst the partners

Schedules for investment loans and bank accounts:

• Some business liabilities are not allowed under Social Security Law depending on what assets they are secured against. Extra details for certain liabilities may be required to determine what security is provided for business loans and therefore which liabilities are allowable as deductions from the assets when calculating the value of the business. Recent statements may also be required to confirm the latest balances of specific investments
• The following documents should be provided:
• Statements, etc. in respect of mortgages and loans owed by the business
• Copies of statements of investments and bank accounts

Any Notes to the Accounts:

• Any Notes to the Accounts, if prepared or any other financial statements prepared need to be provided. These add extra information or explain a particular item on the financial statements. The additional information provided will give a better understanding of the business and will assist in the asset and income determination of the partnership

Partnership agreement:

• A partnership agreement sets out the rights and interest of each member of the partnership. A partnership agreement can either be written, oral, or inferred by the conduct of the members involved
• The terms of a written agreement can be varied with the consent of all the partners and the consent may either be written, oral or inferred
• Where a written agreement exists it may specify:
• The amounts of the business that are held for the partners
• The interest of a partner in relation to a particular asset
• The method of distribution of capital upon the wind up of a business
• Partnership agreements may vary considerably from very concise details to a broad statement of the interest of the partners
• Where there is no partnership agreement, state partnership acts contain provisions outlining the rights and interest of each member of the partnership

Not all documents are required in all cases, for example:

• If a customer advises of the commencement of a business, it is important to take into account the nature of the business
• Accountants for small business enterprises do not always prepare a balance sheet. Some factors to take into account are:
• If a customer advises they have a small service type enterprise (for example, gardening, cleaning, home maintenance), it is possible that a balance sheet will not be prepared
• Where no balance sheet is prepared or where the current market value of the partnership assets and liabilities is different to that shown on the latest available balance sheet, the customer should provide a list of the type and current value of the business assets and liabilities
• The customer should also be advised to notify immediately if the financial position of the business changes
• Not all businesses, particularly those conducting a service type enterprise, will claim a depreciation expense. A depreciation schedule will not be prepared unless depreciation is claimed as an expense

If required, issue a Rural Property Questionnaire (Q454). See Creating an Online Advice (OLA), including within an existing activity.

In conjunction with the Mod R, the Q454 is for medium to large farm properties. It collects information to correctly value a property from the roadside.
Generally, if the property operates as a commercial enterprise, issue a Mod  R as well as a Q454 questionnaire. A  Q454 is not required for smaller properties such as hobby farms with minimal farm improvements, or bush blocks.

A Service Officer assesses partnerships. If a partnership meets the definition of complex, refer it to a Complex Assessment Officer (CAO). For example, partnerships (includes rural) with multiple business activities that are unrelated (excluding investment income and rental).
See Identifying and making suitable referrals to the Complex Assessment Officer (CAO).