Each joint venturer lodges their own tax return
For income tax purposes, an unincorporated (non-entity) JV does not lodge a tax return. Instead, each joint venturer lodges their own tax return, including their own share of deductions for expenses incurred, and each is taxed independently on the sale of their share of the output. That is, they each account for tax separately, and can have completely different tax outcomes (notably, this tax treatment is very different from that of a partnership). Furthermore, each participant in the JV must also separately account for any GST on taxable supplies it makes, and any input tax credits to which it is entitled (unless the JV is a GST JV, in which case special rules apply).
Typically, in a JV arrangement, the joint venturers make their own contributions (i.e., cash, assets, and/or expertise) and take an appropriate share of the end product. Each joint venturer may therefore own its share of the assets independently of the other parties, incur its own expenditure, and derive and account for its own income separately. For example, each participant in the JV will need to determine whether the proceeds they derive from the JV are from the sale of trading stock, on capital account, or a transaction that is part of a profit-making scheme.
Where a joint venturer is not carrying on a business, the land will not be trading stock and the proceeds from the sale of the land will either be received for the mere realization of a capital asset (in which case a CGT liability may arise), or as part of a profit-making scheme. Each joint venturer will be allowed to claim deductions according to their expenditures and circumstances. Certain deductions will be common to all joint venturers, whilst other deductions will depend on each venturer’s circumstances and the JV agreement.
TAX TIP – Special GST rules for joint ventures
Division 51 of the GST Act provides that, where specified requirements are met, the parties to a JV may be treated as a single entity for GST purposes – referred to as a ‘GST joint venture’ (‘GST JV’). The parties must nominate one of them, or a third party, to be the GST JV operator, who is then responsible for accounting for any supplies or acquisitions made by the GST JV and submitting a business activity statement for each tax period. The aim is to simplify accounting for internal transactions by having one entity only (the operator) account for them.
For example, where a land owner and a builder have a GST JV (with the builder nominated as the JV operator) any supply made by the JV operator (e.g., building services) to the land owner is not treated as a taxable supply (and, as such, the land owner will not be entitled to any input tax credits in respect of the acquisition).