Product Ruling

PR 2009/52W

Income tax: ITC Diversified Forestry Project 2009 - Late Investors

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Notice of Withdrawal

Product Ruling PR 2009/52 is withdrawn with effect from today.

1. This Product Ruling has been withdrawn in accordance with subsection 358-20(1) of Schedule 1 to the Taxation Administration Act 1953, which states the Commissioner may withdraw a public ruling either wholly or to an extent.

2. Product Ruling PR 2009/52 set out the Commissioner's opinion on the tax consequences for persons participating in the ITC Diversified Forestry Project 2009 - Late Investors ('the Project'), a forestry managed investment scheme, entered into for the purpose of establishing and harvesting Pulpwood, Indian Sandalwood, Teak and Red Mahogany trees in Australia.

3. Elders Forestry Management Limited ('EFML', the Responsible Entity) advised that Elders Limited entered into transactions which resulted in the Project being carried out in a materially different way from how it was described in Product Ruling PR 2009/52.

4. EFML advised that the Red Mahogany plantations were destroyed as a result of natural disaster. Additionally, Growers voted in favour of a series of transactions resulting in the termination of the other interests in the Project.

5. In March 2013, Growers voted to receive payments from EFML for their Teak and Indian Sandalwood interests. On 3 September 2013, Growers voted to receive a payment from EFML for their remaining Pulpwood interests.

6. These transactions constitute a material difference in the way that the Project has been implemented. This withdrawal notice sets out the taxation treatment of amounts received by Growers under the transactions.

Taxation implications for Growers

7. Each transaction results in a capital gains tax (CGT) event for the purpose of section 394-25 of the Income Tax Assessment Act 1997 (ITAA 1997). As a result, Growers will be required to include the market value or decrease in market value of their 'forestry interests' in their assessable income in the income year in which the CGT event happens (subsection 394-25(2) of the ITAA 1997).

8. The Responsible Entity will provide information to Growers to assist them determine the market value or decrease in market value of their 'forestry interests' for the purpose of section 394-25 of the ITAA 1997.

9. Deductions are not allowable under Division 394 of the ITAA 1997 where a CGT event happens to a Grower's 'forestry interest' before 1 July 2014 (subsection 394-10(5) of the ITAA 1997). However, deductions will not be affected where the CGT event happens because of circumstances outside the Grower's control and the Grower could not have reasonably foreseen the CGT event happening when they acquired the 'forestry interest' (subsection 394-10(5A) of the ITAA 1997).

10. Having regard to the information provided by the Responsible Entity, it is considered that the transactions are a result of circumstances outside individual Grower's control that could not have been reasonably foreseen at the time Growers acquired their interests in the Project. Therefore, the transactions do not disturb the tax treatment of Growers' previous outgoings as set out in PR 2009/52 provided that the Project was carried out in the manner described in the Ruling up until the date the transaction for the sale of the Pulpwood component of the Project was implemented.

11. Paragraph 31 of PR 2009/52 ruled that Growers can claim deductions for interest incurred under a loan agreement with the Preferred Financier as described at paragraphs 83 to 85 of PR 2009/52. Interest expenses will continue to be deductible provided Growers meet certain requirements outlined in TR 2004/4 Income tax: deductions for interest incurred prior to the commencement of, or following the cessation of, relevant income earning activities.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Commissioner of Taxation
6 November 2013

Not previously issued as a draft

References

ATO references:
NO 1-4UIOGUK

Related Rulings/Determinations:

TR 97/7
TR 97/11
TR 98/22
PR 2009/10

Subject References:
4 year holding period
70 per cent DFE rule
DFE
direct forestry expenditure
forestry interest
forestry MIS
interest expenses
market value substitution rule
payments under the scheme
producing assessable income
product rulings
reasonable expectation
tax avoidance
taxation administration

Legislative References:
ITAA 1936 82KL
ITAA 1936 Pt III Div 3 Subdiv H
ITAA 1936 82KZL
ITAA 1936 82KZLA
ITAA 1936 82KZM
ITAA 1936 82KZMA
ITAA 1936 82KZMB
ITAA 1936 82KZMC
ITAA 1936 82KZMD
ITAA 1936 82KZME
ITAA 1936 82KZMF
ITAA 1936 Pt IVA
ITAA 1936 170
ITAA 1936 177A
ITAA 1936 177C
ITAA 1936 177D
ITAA 1936 177D(b)
ITAA 1936 318
ITAA 1997 6-5
ITAA 1997 6-10
ITAA 1997 8-1
ITAA 1997 8-1(1)
ITAA 1997 8-1(1)(a)
ITAA 1997 8-1(2)
ITAA 1997 8-1(2)(a)
ITAA 1997 8-5
ITAA 1997 10-5
ITAA 1997 12-5
ITAA 1997 25-25
ITAA 1997 25-25(1)
ITAA 1997 25-25(4)
ITAA 1997 Div 35
ITAA 1997 Div 394
ITAA 1997 394-10
ITAA 1997 394-10(1)
ITAA 1997 394-10(1)(c)
ITAA 1997 394-10(1)(d)
ITAA 1997 394-10(1)(e)
ITAA 1997 394-10(1)(f)
ITAA 1997 394-10(2)
ITAA 1997 394-10(4)
ITAA 1997 394-10(5)
ITAA 1997 394-10(6)
ITAA 1997 394-10(7)
ITAA 1997 394-15(1)
ITAA 1997 394-15(2)
ITAA 1997 394-15(4)
ITAA 1997 394-15(5)
ITAA 1997 394-20
ITAA 1997 394-25
ITAA 1997 394-25(1)(c)
ITAA 1997 394-25(2)
ITAA 1997 394-25(3)
ITAA 1997 394-30
ITAA 1997 394-35
ITAA 1997 394-35(1)
ITAA 1997 394-35(2)
ITAA 1997 394-35(3)
ITAA 1997 394-35(4)
ITAA 1997 394-35(5)
ITAA 1997 394-35(6)
ITAA 1997 394-35(7)
ITAA 1997 394-35(8)
ITAA 1997 394-40
ITAA 1997 394-45
ITAA 1997 995-1
TAA 1953
TAA 1953 Sch 1 394-10
SISA 1993
Copyright Act 1968
Corporations Act 2001

Case References:
Australian National Hotels Ltd v. Federal Commissioner of Taxation
(1988) 19 FCR 234
88 ATC 4627
19 ATR 1575

Federal Commissioner of Taxation v. Roberts
(1992) 37 FCR 246
92 ATC 4380
23 ATR 494
Fletcher & Ors v. Federal Commissioner of Taxation
(1991) 173 CLR 1
91 ATC 4950
22 ATR 613
Hance v. FC of T; Hannebery v. FC of T
[2008] FCAFC 196
2008 ATC 20-085
Ronpibon Tin NL v. Federal Commissioner of Taxation
(1949) 78 CLR 47
8 ATD 431
Steele v. Federal Commissioner of Taxation
197 CLR 459
41 ATR 139
99 ATC 4242