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 Guide to capital gains tax 2019. If the company is a member of a collapsed agribusiness managed investment scheme, see Collapse and restructure 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.
Example 6 shows how to calculate the amount to include at Q where the fund sold its forestry interest.
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 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').
Use the lesser of the two amounts above in the following formula:
Include at Q the amount calculated using the formula.
In a future income year (a year in which the trust receives further proceeds from a harvest or the sale of its forestry interest), disregard the amount of the 'net deductions' that has already been reflected at Q.
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 2019.
Example 6: Sale receipts: forestry interest no longer held
Cedar Trust 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 Trust 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.
During an earlier period, it received $1,500 from thinning proceeds (its incidental forestry scheme receipts).
Cedar Trust will need to include $2,500 (that is, $4,000 − $1,500) at Q, because this amount is less than the market value of its forestry interest at the time of the CGT event.
CGT notes:
- Cedar Trust will take the amount that it included at Q into account when working out the amount to include at A Net capital gain; see Guide to capital gains tax 2019.
- The capital gain would be $3,500. That is, capital proceeds of $20,000 less cost base of $16,500. The $16,500 is made up of $14,000 plus $2,500 that was included in assessable income.
Example 7: Harvest receipts: forestry interest still held
Oakey Trust 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 2018–19.
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.
During the time that it held its interest, Oakey Trust 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) was $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 for the net deductions).
The amount to use in step 2 is $2,500.
Step 2 Using the formula above:
$2,500 × $5,000 ÷ $20,000 = $625
Oakey Trust disregards the $625 when determining the amount to include in step 2 for any future income year when it receives harvest proceeds or sells its forestry interest. This is because the $625 amount is already reflected in its assessable income in the current income year, 2018–19.
Step 3 As the amount calculated at step 2 is less than the amount calculated at step 1, the Oakey Trust will need to include $625 at Q in its 2019 tax return.
CGT notes:
- Oakey Trust has disposed of 25% of its forestry interest. It must also calculate the amount it must include at A Net capital gain.
- For 2018–19 the capital gain would be $875. That is, capital proceeds of $5,000 less apportioned original cost base of $4,125. The $4,125 is made up of $3,500 (25% of $14,000) plus $625 that is included in assessable income.