Private ruling: Corporate limited partnership
Date of advice: 24 March 2026
Published: 29 June 2026
Ruling period: 1 July 2023 to 30 June 2025

Ruling: Q1: Is Trust A entitled to a deduction for the losses incurred by Limited Partnership B? | A1: No

Relevant facts and circumstances: 1. Trust A is a member of Limited Partnership B, formed in Country C, with two partners. 2. The general partner is Company D (registered in Country C). Company D has an X% interest in Limited Partnership B's profits or losses, and acts as the sole manager of the business. 3. The limited partner is Trust A, with a Y% interest in any profits or losses. 4. The trustee of Trust A is an Australian resident company. 5. Limited Partnership B incurred net losses in the 2024 and 2025 income years, has lodged tax returns in Country C, and distributed losses to Trust A in each year. 6. Limited Partnership B's central management and control is exercised by the directors of Company D, and those directors are Australian residents. 7. Company D employs a Country C resident as a manager to conduct Limited Partnership B's business operations.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 90 | Section 92 | Section 94D | Section 94J | Section 94K | Section 94T | Income Tax Assessment Act 1997 Section 830-10

Reasons for decision: Summary: 8. Trust A isn't entitled to a deduction for the losses. Limited Partnership B is treated as an Australian resident company for Australian tax purposes, so the rules allowing partners to deduct their share of partnership losses don't apply. | Detailed Reasoning - Explanation: 9. Under rules in Division 5, when a partnership has a loss (calculated under section 90), partners who are Australian residents may claim their interest in the partnership loss as a deduction: see subsection 92(2). 10. However, Division 5A has rules that treat 'corporate limited partnerships' as companies (rather than partnerships) for income tax purposes: see especially sections 94J and 94K. 11. Limited partnerships are generally treated as corporate limited partnerships, unless exceptions apply. See section 94D. One relevant exception is for limited partnerships that qualify as foreign hybrid limited partnerships: subsection 94D(5). 12. A limited partnership will be a 'foreign hybrid limited partnership' if it meets all the conditions listed in subsection 830-10(1). 13. One of those conditions is that the limited partnership isn't an Australian resident, if subsection 94D(5) is disregarded: paragraph 830-10(1)(d). 14. Disregarding the exception for foreign hybrid limited partnerships in subsection 94D(5), Limited Partnership B would be a corporate limited partnership under Division 5A. 15. A corporate limited partnership will be an Australian resident if the partnership's central management and control is in Australia: see subparagraph 94T(1)(f)(ii). 16. Limited Partnership B is an Australian resident because its central management and control is exercised by Company D's directors, and those directors are Australian residents. 17. Since Limited Partnership B is an Australian resident, it doesn't meet paragraph 830-10(1)(d) and isn't a foreign hybrid limited partnership. 18. This means Limited Partnership B is treated as a corporate limited partnership under Division 5A, rather than a partnership. 19. Since Limited Partnership B isn't treated as a partnership for Australian tax purposes, Trust A can't deduct the partnership loss under Division 5. 20. As an aside, Company D is also an Australian resident for tax purposes. • A company (that isn't incorporated in Australia) will be is a resident of Australia if it carries on business in Australia and has its central management and control in Australia: see paragraph (b) of the definition in section 6. • A company (with business operations elsewhere) with central management and control in Australia will be taken to be carrying on business in Australia for the purposes of the corporate residency test. This is because central management and control is factually part of carrying on the business. See TR 2018/5 at paragraphs 7 and 8. [1] • Company D's directors would also likely exercise central management and control of Company D, and those directors are Australian residents. • This means Company D will be taken to be both carrying on business in Australia and having its central management and control in Australia, making it an Australian resident under the corporate residence test in paragraph (b) of section 6. [1] Taxation Ruling TR 2018/5 Income tax: central management and control test of residency.