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Partnerships of Trusts

I have a partnership of trusts agreement set up by NTAA Corporate. I now want to change some of the partners - can you do this for me?

Unfortunately, no. However, the procedure for making changes in the partners is provided in the agreement. Refer to clause 5 of our current partnership agreement.

I have ordered a Partnership of Trusts with Agent. Who registers for GST and the ABN - the partnership or the agent?

The answer is - it depends. Generally, the partners (i.e., partnership) will always register for an ABN, and for GST if the taxable supplies made by the partnership (whether directly or through the agent) are greater than $75,000 per annum (previously $50,000 p.a.). The Agent can register for an ABN and GST also, if it chooses - this is will depend on the circumstances and is up to the relevant agent and partnership. However, even if the Agent registers for GST, the Partners will still be responsible for the GST obligations of the Partnership (even if the Agent trades on their behalf).

The agent of my partnership is not registered for GST, but does have an ABN. Can this agent still issue tax invoices on behalf of the partnership with its own name and ABN, even though it is not registered for GST?

The ATO has confirmed that an agent, acting on behalf of a client that is registered for GST, can issue a valid tax invoice with its own name and ABN on the invoice rather than the client's, even if the agent is unregistered for GST.

That is, there is no requirement that the agent be registered for GST.

The agent of my partnership does not have an ABN. Can this agent issue tax invoices on behalf of the partnership?

Yes, but the tax invoices should include the partnership's name and ABN as the client and issuer.

What happens if a partner leaves or joins, does the registration process have to happen all over again?

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.

So when there are new partners added, does this make it a completely new partnership?

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.

Does the Partnership of Trusts agreement 'allow or facilitate' for the coming and going of Partners?

The part of the agreement entitled "Admission to and exit from the Partnership" deals with partners voluntary retiring or dying, or being "fired", and admitting new partners.

I have a partnership of trusts agreement set up by NTAA Corporate. The partners wish to change something in the agreement - can you do this for me?

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.

We need to set up an agency agreement between a company and a partnership of trusts, similar to the agreement normally set up between a corporate manager and partnership of trusts. The only problem we have with the agreement is that it would have to be retrospectively back dated as the business started trading circa 6 months ago. The query is, can we in fact back date the agency agreement and will it be a problem?

We do not backdate documents - we only issue documents for trusts, partnerships, etc, that are being set up. Also, the way our documents work, everything they would get would only be relevant if the partnership was being set up now.

However, you may be able to have an agency agreement drawn up which recognises that the agent was appointed six months ago by the partnership of trusts, but that they weren't able to put it into writing until now (the partners could probably even recognise the appointment in a simple written resolution of the partnership, although this would not contain all of the extra bells and whistles regarding the terms of the agency arrangement that is contained in our partnership agreement). Such an agreement would still be dated with the date of execution, but may also specify an earlier commencement date (specific legal advice should be sought about this). However, our documents won't be sufficient for such a retrospective recognition of the agency arrangement, and if the partners (and agent) can't agree, in writing, on how they want the agency to operate, they may need to see a lawyer to draft something up specifically for them.

This all assumes that the company was actually appointed as agent 6 months ago as a question of fact, but it just wasn't put in writing (if this is not the case, you should not under any circumstances enter into the written agreement as described above). You would need to be able to prove that this appointment actually did take place, to prove that the company did everything during that time as the partnership's agent, and not on its own account.

Do you have any further info on what legally the agent can do, and to what extent it must disclose to various business parties (e.g., banks, clients, finance companies) that it is acting in its capacity as agent only?

The law of agency has been developed over hundreds of years and can get quite complicated. Unfortunately, at this stage, we don't have a short summary of how the law of agency works. Generally, if anyone needs advice in this regard, they will need to speak to their solicitor.

However, we can say that our Partnership of Trusts agreement (with agent) specifies that an appointed agent has pretty much full powers in relation to any business it conducts on behalf of its principals, and that it is not obliged to disclose to anyone that it is acting as agent. Of course, the partnership agreement only regulates the relationship between the partnership and the agent, but other parties - especially banks - may require that such a relationship be disclosed to them.

Can I order a partnership of two discretionary trusts with the same company acting as trustee of the trusts and of the agent?

You can have the same company act as trustee of a trust and as the agent of the partnership, although this may present problems if, for example, the partners start fighting or the partners and the agent enter into a dispute (at the least, a separate agreement outlining the steps for disupte resolution should be entered into).

Also, we could be wrong, but we've never heard of a company being in partnership with itself (albeit in two different capacities - i.e., as trustee of two separate trusts)

Although this structure might save a bit of money, we can't really recommend it.

What's the definition of an Agent of a Partnership?

There's no definition as such - the agent is the person/company appointed by the partners to have the role of agent under the agreement. The agent, once appointed, then has a number of powers and responsibilities under the agreement (all of clause 4 is dedicated to the relationship between the partners and the agent (2-and-a-half pages), plus there are other references in the agreement). Basically, the agent can run the partnership business as if it were the sole owner, but it answers to the partners.

Refer to our online guide for more details: