10 Forestry managed investment scheme income

Write at Q item 10 the total income from the forestry interests that the trust holds in a forestry managed investment scheme (FMIS). The amount you show at Q will depend on the points below.

Do not include capital gains from an FMIS; show these at A Net capital gain item 21. For more information on the CGT treatment of the company’s forestry interests, see the Guide to capital gains tax 2016. If the company is a member of a collapsed agribusiness managed investment scheme, see Collapse of agribusiness managed investment schemes: participant information for information on calculating your income and deductions.

Definitions

A forestry interest in a forestry managed investment scheme (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 forestry manager of an FMIS is the entity that manages, arranges or promotes the FMIS.

A trust is an initial participant in a FMIS if:

• it obtained its forestry interest in the FMIS from the forestry manager of the scheme
• its payment to obtain the forestry interest in an FMIS results in the establishment of trees.

A trust is a subsequent participant in an FMIS if it acquired its interest 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 amount of the trust’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. For more information on amounts the trust can deduct, see item 17 Forestry managed investment scheme deduction.

The amount of the trust’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.

For an initial participant in an FMIS

Thinning receipts

If the trust 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 trust ceased holding its forestry interest as a result of a CGT event (because it sold its interest or it received harvest proceeds), and
• the trust has claimed a deduction, or can claim a deduction, or would be entitled to deduct such amounts but for a CGT event happening within four years after the end of the income year in which the it first pays an amount under the FMIS,

then 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 trust still held its forestry interest (because it sold part of its interest or there was a partial harvest), and
• the trust has claimed a deduction, or can claim a deduction, or would be entitled to deduct such amounts but for a CGT event happening within four years after the end of the income year in which the trust first pays an amount under the FMIS,

include at Q the amount by which the market value of the forestry interest was reduced as a result of the CGT event.

For a subsequent participant in an FMIS

Thinning receipts

If the trust received thinning proceeds from its forestry interest then include the actual amount received at Q.

Sale and harvest receipts – forestry interest no longer held

If:

• the trust ceased holding its forestry interest as a result of a CGT event (because it sold its interest or it received harvest proceeds), and
• the trust has deducted, or can deduct, or could have deducted, an amount if the trust had paid the amount under the scheme in relation to the forestry interest,

then include at Q the lesser of

• 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 trust still held its forestry interest (because it sold part of its interest or there was a partial harvest)
• the trust can deduct, or has deducted, or could have deducted, an amount if the trust had paid the amount under the FMIS in relation to the forestry interest,

work out:

• the market value of the forestry interest at the time of the CGT event
• the amount (if any) by which the total forestry scheme deductions exceeded the incidental forestry scheme receipts ('net deductions').

Example 6 shows how to calculate the amount to include at Q where the fund sold its forestry interest.

Use the lesser of the two amounts above in the following formula:

amount worked out above	X	the decrease (if any) in the market value of the forestry interest (as a result of the CGT event)
		the market value of the forestry interest just before the CGT event

Use this formula to calculate the amount which is included in assessable income to the extent that the sale or harvest payment matches net deductions.

Include at Q the amount calculated using the formula. The remainder of the net deductions will be claimed in a future income year (a year in which the trust receives further proceeds from a harvest or the sale of its forestry interest).

Example 7 shows how to calculate the amount to include at Q where there is a harvest payment made and the fund still holds the forestry interest.

To complete this item

Add up all the amounts you worked out for the trust’s FMIS income. Write the total at Q.

See examples 6 and 7 for how to calculate the amount you show at Q where the trust is a subsequent participant that holds the forestry interest on capital account.

For more information on the CGT treatment of a trust’s forestry interest acquired as a subsequent participant, see Guide to capital gains tax 2016.