Rojoda – High Court of Australia finds that a partner or former partner of a partnership does not have a fixed interest in its assets prior to winding-up

The application of various ITA provisions turns on the legal character of a partner’s interest in partnership property. For example, is an interest in a partnership holding land inventory an “eligible property” under s. 85(1.1); or is a Crown corporation with a 99% interest in a partnership with a wholly-owned subsidiary considered to be a 90% owner of the shares of that subsidiary for s. 149(1)(d.2) purposes?

The High Court considered it to be “orthodox” and correct law that “the interest of partners in relation to partnership assets is not an interest in any particular asset but is an indefinite and fluctuating interest in relation to the assets, being the right to a proportion of the surplus after the realisation of the assets and payment of the debts and liabilities of the partnership.” It then determined that this same non-specific interest in the partnership property continued following the dissolution of a partnership and before the completion of its winding-up.

Neal Armstrong. Summary of Commissioner of State Revenue v Rojoda Pty Ltd [2020] HCA 7 under s. 85(1.1).