The tax implications of removing a partner from an ABN partnership in Australia can be quite significant and require careful consideration.
When a partner is removed, it may result in the dissolution of the existing partnership and the formation of a new one. This change necessitates the lodging of separate tax returns for both the old and new partnerships. Specifically, one tax return must be filed for the original partnership covering the period from the start of the income year to the date of dissolution.
Subsequently, another tax return is required for the newly formed partnership from the date of its establishment to the end of the income year. If the partnership is merely reconstituted—meaning the business continues without a substantial break and at least one original partner remains—then a new TFN and ABN may not be necessary, and only one tax return for the entire income year needs to be lodged.
However, if the changes are more than a technical dissolution, indicating a complete winding up of the original partnership, a new TFN and ABN are required for the new partnership entity. It's also important to note that GST registrations and other tax obligations may be affected, and these should be reviewed in the context of the new partnership structure.
Given the complexity of these changes, it is advisable to seek guidance from a tax professional or legal advisor to ensure compliance with all tax laws and regulations and to understand the full scope of the tax implications involved.