How do partners declare partnership income on individual returns?

Direct answer

Partners should prepare their individual returns from an agreed, documented allocation of the partnership results. SARS states that each partner is taxed on that partner's share of partnership profits. The practical task is to make the agreement, accounting records, partner allocation and current SARS disclosure process agree before any individual ITR12 is submitted.

For the current partnership beneficial-owner workflow, SARS says an appointed representative completes and submits the IT3(BO) form annually. After processing, SARS issues an IT3(BO) unique number. Partners use that number when declaring partnership details on the ITR12. This change reduces repeated partner-detail capture, but it does not remove the need for each partner to review the income and expense allocation supporting that partner's own return.

What this means in practice

Do not start from cash drawings. A partner can receive money during the year that is not the same as the final taxable share of profit. Conversely, a partner may have a taxable share even where cash has been retained for partnership commitments. Start with the partnership agreement, the year-end accounts and an allocation schedule, then ask how the income, expenses and other items are divided under the agreement and the facts.

The sharing ratio should not be invented at year end to obtain a preferred tax result. If it changed during the year, retain the signed agreement or other evidence explaining when and why it changed. Partners should use the same reconciled records, while taking care that their individual returns do not duplicate a partnership cost or omit a partnership item.

The ITR12 guide is a completion guide, not a substitute for the allocation. Return fields and questions can change by year, so use the relevant current process in eFiling. If the partnership is complex, has foreign income, assets, VAT issues, multiple trades, farming, changes in partners, or a loss, prepare the working papers before opening the return.

Step-by-step

1. Obtain the core file.

Keep the partnership agreement, amendments, accounting records, bank reconciliations and annual financial statements.

1. Prepare an allocation schedule.

Show the total result and each partner's agreed share. Explain any changes in percentage, admission or exit of a partner, drawings, reimbursements and adjustments.

1. Confirm the IT3(BO) process.

The appointed representative should submit the annual form and obtain the SARS-issued unique number. Partners should retain the notification and verify the relevant number for the filing year.

1. Reconcile each partner's figures.

Compare the allocation schedule to the information each partner plans to enter. Do not rely on a rough estimate from another partner.

1. Keep supporting documents.

Preserve invoices, contracts, proof of payment, books and the final accounts. SARS expects return support to be retained for at least five years.

1. File only after review.

Use the current ITR12 questions and correct errors through the available SARS process rather than submitting contradictory information.

Documents and records to keep

• Partnership agreement, amendments and proof of each profit or loss percentage.
• Annual accounts, trial balance, bank reconciliations and tax workpapers.
• IT3(BO) submission confirmation, notices and unique number.
• Detailed allocation schedule signed or confirmed by the partners.
• Correspondence about partner changes, reimbursements and drawings.
• Final ITR12 copies, assessments and supporting records.

Important limits and exceptions

This guide concerns ordinary individual return preparation. It does not determine whether a partnership is validly formed, whether a particular expense qualifies, whether a loss is usable, or how a trust or company partner is taxed. A turnover-tax partnership, farming partnership or partnership with non-resident or corporate partners can have additional requirements.

Never assume that each partner must use an equal share. The correct share follows the partnership agreement and relevant facts. Do not make a one-sided adjustment to an individual return without first reconciling the partnership records.

When to get tailored advice

Get advice where the agreement is absent or changed, a partner joined or left, the partnership has a loss, capital asset transaction, foreign item, farming operation or significant disagreement between the accounts and the return. TaxProof can assemble a practical allocation file for professional review.

Related TaxProof guides

• What business expenses can a sole proprietor claim?
• How do I submit a tax return?

Sources

• SARS, Partnerships
• SARS, Simplified Beneficial Owner Register for Partnerships
• SARS, Comprehensive Guide to the ITR12 Income Tax Return for Individuals
• SARS, [Guide to the Beneficial Owner Register for Partnership (IT3[BO])](https://www.sars.gov.za/guide-to-the-beneficial-owner-register-for-partnership-it3bo/)