Knowledge Details

Unfortunately, no. However, the procedure and consequences of the exit of partners is provided in clause 5 of our current partnership agreement. The existing partners and the new partners can agree as to the terms of the admission of a new partner.

Note that when the membership of a partnership changes, that partnership is often considered to have come to an end, and a new partnership, with new partners, comes into existence.

Legally, when the membership of a partnership changes, the old partnership is considered to have come to an end, and a new partnership to have begun (e.g., the partnership of X and Y acting together is a different thing to the partnership of X, Y, and Z acting together). The ATO generally states "If a partnership is reconstituted - that is, there is a change in membership through admission, retirement or death of members - the partnership will usually need a new TFN." However, "You do not need a new TFN and do not need to lodge two tax returns if a partnership has 20 or more partners and the change - under the reconstitution - represents less than 10% change in the beneficial interest of the partnership."

The situation with ABNs and GST is different again. In GSTR 2003/13, the ATO considers that, for GST purposes, "it is open and appropriate for the Commissioner to accept that a change in membership does not necessarily result in the general dissolution and winding up of the partnership", where the partnership agreement contains a "continuity clause" (i.e., a clause, express or implied, stating that the partnership continues even if there is a change in membership). Our partnership agreement contains such a continuity clause.

If this does occur, it is best to get advice at the time to do the best thing by the partnership - either see your solicitor or you could call the NTAA's Hotline on 1800 808 105.

Legally, yes. As discussed above, the ATO has some administrative solutions to this, though, so that registrations, etc, do not always need to be changed each time a partner is added or leaves.

Unfortunately, no. However, note that a change to the partnership agreement does not require a deed - the partners can simply agree in writing to any change. Refer to clause 9.10 of our current partnership agreement.