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Section 424 CTA2010

As for lessor companies the income amount is matched by an expense amount and this expense amount must be calculated and allocated appropriately.

When a partner reduces its interest in a business another partner will increase its interest in the business. This may happen because a partner leaves and the other partners take on the share of the leaving partner or when a partner sells its share in a partnership to a new partner.

When this happens, the other partner whose share increases as a consequence will be allocated an amount to be treated as an expense of its notional business.

This amount is limited to the ‘appropriate percentage of the amount of the income�.

»Ê¹ÚÌåÓýapp appropriate percentage is calculated using the formula:

OCI/PCD

OCI is the increase in the partner’s interest in the business. This includes an increase from ‘nil� in the case of a company becoming a partner.

PCD is the decrease in the partners� interests in the business.

»Ê¹ÚÌåÓýapp amount of the income is the amount brought into charge under section 417.

»Ê¹ÚÌåÓýapp total income and expense amounts match.

Example: expense amount - change in interest in business

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In this example the interest of A Ltd in the partnership business falls by 80%.

»Ê¹ÚÌåÓýapp income amount is therefore 80% of the ‘basic amountâ€�.

»Ê¹ÚÌåÓýapp interest of B Ltd in the partnership business increases by 80% and this increase is caused by the decrease in the interest of A Ltd in the partnership business.

»Ê¹ÚÌåÓýapp expense amount is therefore 80/80 = 100% of the amount brought into charge.

»Ê¹ÚÌåÓýapp income and expense amounts match.