Product Ruling

PR 2001/56A - Addendum

Income tax: Forest Rewards Teak Project 2001

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FOI status:

may be released

Addendum

Legislative amendments were recently passed that allow certain prepaid forestry expenditure to be deductible in the year incurred (section 82KZMG). In addition subsection 35-55(2) has been repealed. This Addendum is to address the taxation consequences of those amendments.

At paragraph 44 in row three of column four of the table, delete:

See note (i) above

and replace with:

See note (iii) below

Below the table at paragraph 44 add:

Notes:

(iii)

Where a Grower enters the Project on or after 2 October 2001 and chooses to prepay the First Year Fee, the expenditure is deductible in the year incurred as the expenditure is for 'seasonally dependent agronomic activities'.

Delete paragraphs 46 to 49 from the Ruling part of the Product Ruling and replace with:

46. For a Grower who is an individual, enters the Project during the years ended 30 June 2001 or 30 June 2002, and does not elect to harvest and market their own timber, the rule in section 35-10 may apply to the business activity comprised by their involvement in this Project. Under paragraph 35-55(1)(b) the Commissioner will decide for a Grower of Year 2001 Woodlots for the income years ending 30 June 2001 to 30 June 2019 that the rule in section 35-10 does not apply to this activity, provided that the Project is carried out in the manner described in this Ruling. Similarly, for a Grower of Year 2002 Woodlots, the Commissioner will decide for the income years ending 30 June 2002 to 30 June 2020 that the rule in section 35-10 does not apply to this activity, provided that the Project is carried out in the manner described in this Ruling.

47. This exercise of the discretion in subsection 35-55(1) will not be required where, for any year in question:

•

the 'exception' in subsection 35-10(4) applies;

•

a Grower's business activity satisfies one of the tests in sections 35-30, 35-35, 35-40 or 35-45; or

•

a Grower's business activity produces assessable income for an income year greater than the deductions attributable to it for that year (apart from the operation of subsection 35-10(2)).

48. Where the 'exception' in subsection 35-10(4) applies, or the Grower's business activity satisfies one of the tests, or the discretion in subsection 35-55(1) is exercised, section 35-10 will not apply. This means that a Grower will not be required to defer any excess of the deductions attributable to their business activity in excess of any assessable income from that activity, i.e., any 'loss' from that activity, to a later year. Instead, this 'loss' can be offset against other assessable income for the year in which it arises.

49. Growers are reminded of the important statement made on Page 1 of this Product Ruling. Therefore, Growers should not see the Commissioner's decision to exercise the discretion in paragraph 35-55(1)(b) as an indication that the Tax Office sanctions or guarantees the Project or the product to be commercially viable. An assessment of the Project or the product from this perspective has not been made.

Commissioner of Taxation
1 May 2002

References

ATO references:
NO T2001/014151