A joint venture (JV) is an agreement between two or more parties where they work together on a specific project. For tax purposes, a JV involves:
- Sharing the product or output of the project, not just the profits.
- A written agreement between the parties.
- A specific economic project, like a development.
- Joint control by the participants.
- Sharing costs according to the JV agreement, with each party handling its expenses, finances, and debts.
The Australian Taxation Office (ATO) defines a 'non-entity' JV as a contractual arrangement where parties jointly control an economic activity to obtain individual benefits from the output, rather than joint profits.
It's important for parties entering a JV to distinguish it from a partnership, as they have different tax and asset protection consequences. A partnership involves carrying on business together, while a JV focuses on a specific project. Partnerships also don't benefit from the special GST rules that apply to JVs.
Participants in a JV usually have a written agreement outlining their roles and responsibilities. However, the ATO considers the actual relationship between the parties to determine if it's a partnership or a JV, regardless of what the agreement says.
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