Section DC 4 — Income Tax Act 2007: Payments to working partners

DC 4 Payments to working partners Deduction (1) A person who is a partner in a partnership is allowed a deduction for their share of a payment made under a contract of service to a partner who personally and actively performs duties that— (a) are required to be performed in carrying on the business of the partnership; and (b) are performed by the partner during the currency of the contract of service. Exclusion (2) This section does not apply to a partnership that is engaged wholly or mainly in investing money or in holding, or dealing in, shares, securities, investments, or estates or interests in land. Amount of deduction (3) The amount of the deduction is limited to the amount of the payment authorised by the contract of service and any bonus, whether or not the payment of a bonus is authorised by the contract. Relationship with section GB 23 (4) This section is overridden by section GB 23 (Excessive remuneration to relatives). Meaning of contract of service (5) In this section, contract of service , for a partner and a partnership, means an agreement that— (a) specifies the terms and conditions of the services to be performed by the partner; and (b) specifies the amount payable to the partner for the performance of the services; and (c) is entered into by all the partners in the partnership; and (d) is in writing. Link with subpart DA (6) This section supplements the general permission. The general limitations still apply. Defined in this Act: amount , business , contract of service , deduction , estate , general limitation , general permission , interest , land , pay , share , supplement , Compare: 2004 No 35 s DC 4