Definitions
A partnership is an initial participant in a forestry managed investment scheme (FMIS) if:
- it obtained its forestry interest in the FMIS from the forestry manager of the scheme, and
- its payment to obtain the forestry interest in an FMIS results in the establishment of trees.
A partnership is a subsequent participant if it obtains an interest in a forestry managed investment scheme through secondary market trading. This means it acquired its interest other than as an initial participant, usually by purchasing that interest from an initial participant in the scheme.
The forestry manager of an FMIS is the entity that manages, arranges or promotes the FMIS.
A forestry interest in an FMIS is a right to benefits produced by the FMIS - whether the right is actual, prospective or contingent, and whether it is enforceable or not.
The amount of the partnership's total forestry scheme deductions is the total of all the amounts it can deduct or has deducted for each income year it held its forestry interest - see item 17 'Forestry managed investment scheme deduction' for further information on amounts you can deduct.
The amount of the partnership's incidental forestry scheme receipts is the total of all the amounts it has received from the FMIS in each income year it held its forestry interest, other than amounts received because of a capital gains tax (CGT) event.
Write at Q item 10 the total income from the following activities for each FMIS in which the partnership holds a forestry interest.
For an initial participant in an FMIS
Thinning receipts
If the partnership received thinning proceeds from its forestry interest, include the actual amount received at Q.
Sale and harvest receipts - forestry interest no longer held
If the partnership ceased holding its forestry interest as a result of a CGT event (because it sold its interest or it received harvest proceeds), include the market value of the forestry interest at the time of the CGT event at Q.
Sale and harvest receipts - forestry interest still held
If a CGT event happened and the partnership still held its forestry interest (because it sold part of its interest or there was a partial harvest), include the amount by which the market value of the forestry interest was reduced at Q.
For a subsequent participant in an FMIS
Thinning receipts
If the partnership received thinning proceeds from its forestry interest, include the actual amount received at Q.
Sale and harvest receipts - forestry interest no longer held
If the partnership ceased holding its forestry interest as a result of a CGT event (because it sold its interest or it received harvest proceeds) include at Q the lesser of the following two amounts:
- the market value of the forestry interest at the time of the CGT event, or
- the amount (if any) by which the total forestry scheme deductions exceeded the incidental forestry scheme receipts.
Sale and harvest receipts – forestry interest still held
If a CGT event happened and the partnership still held its forestry interest (because it sold part of its interest or there was a partial harvest) work out the following two amounts:
- the market value of the forestry interest at the time of the CGT event, and
- the amount (if any) by which the total forestry scheme deductions exceeded the incidental forestry scheme receipts.
Use the lesser of the two amounts above in the following formula:
amount worked |
|
the decrease (if any) in the market value of the forestry interest |
the market value of the forestry interest just before the CGT event |
Include at Q the amount calculated using the formula.
To complete this item
Add up all the amounts you worked out for the partnership's FMIS income and write the total at Q.
See examples 7 and 8 for how to calculate the amount you show at Q.
For more information on the CGT treatment of a partnership's forestry interest, see Guide to capital gains tax 2011-12.
Example 7
Cedar Partnership is a subsequent participant in an FMIS. It sold its forestry interest at the market value of $20,000. The sale of the forestry interest is a CGT event. The original cost base was $14,000.
In the time that Cedar Partnership held the forestry interest, it claimed $4,000 in deductions (its total forestry scheme deductions) for lease fees, annual management fees and the cost of felling that it paid to the forestry manager. In the same period, it received $1,500 from thinning proceeds (its incidental forestry scheme receipts).
Cedar Partnership will need to include $2,500 (that is, $4,000 minus $1,500) at Q, because this amount is less than the market value of its forestry interest at the time of the CGT event.
Example 8
Oakey Partnership is a subsequent participant in an FMIS. It received harvest proceeds over two income years. It received the first harvest payment of $5,000 in the 2011-12 income year.
The market value of its forestry interest was $20,000 just before it received its payment for the first harvest (which is a CGT event). After it received this first harvest payment, the market value of its forestry interest was reduced to $15,000. Its original cost base was $14,000.
In the time that it held its interest, Oakey Partnership claimed $4,000 in deductions (its total forestry scheme deductions) for lease fees, annual management fees and the cost of felling that it has paid to the forestry manager. In an earlier period, it received $1,500 from thinning proceeds (its incidental forestry scheme receipts).
Step 1 The market value of the forestry interest (at the time of the CGT event) is $20,000.
The amount by which the total forestry scheme deductions exceed the incidental forestry scheme receipts is $2,500 (that is, $4,000 minus $1,500).
The amount to use in step 2 is $2,500.
Step 2 Using the formula above:
|
|
$5,000 |
|
|
$20,000 |
Step 3 Oakey Partnership will need to include $625 at Q.
Step 4 Oakey Partnership will need to include the remainder from step 2 of $1,875 (that is, $2,500 minus $625) at Q on its 2013 tax return.
End of example