Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon Peter Costello MP)Chapter 5 - Forestry managed investments
Outline of chapter
5.1 Schedule 5 to this Bill extends the operation of section 82KZMG of the Income Tax Assessment Act 1936 , which was set to expire on 30 June 2006, until 30 June 2008. The amendment ensures that investors in forestry managed investment schemes can continue to claim deductions for certain prepaid expenditure for a further two years.
Context of amendments
5.2 Section 82KZMG provides a '12-month rule' that, in effect, facilitates an immediate deduction for certain prepaid expenditure incurred under a plantation forestry managed agreement. The 12-month rule applies to expenditure for 'seasonally dependent agronomic activities' that will be carried out during the establishment period of a particular planting of trees. The provision applies to expenditure incurred on or after 2 October 2001 and on or before 30 June 2006.
5.3 In the Minister for Revenue and Assistant Treasurer's Press Release No. 35 of 10 May 2005, the Government announced its intention to extend the operation of the 12-month rule until 30 June 2008. The Government stated that the extension for a further two years of the 12-month rule would allow an extensive review to be conducted into all aspects of support for the plantation timber industry.
Summary of new law
5.4 Schedule 5 ensures that eligible taxpayers may continue to claim a deduction for certain prepaid expenditure provided the expenditure is incurred on or before 30 June 2008.
Comparison of key features of new law and current law
| New law | Current Law |
|---|---|
| Investors will be allowed to obtain an immediate deduction provided the expenditure is incurred on or before 30 June 2008. | The 12-month rule currently allows investors to obtain an immediate deduction for funds contributed in one financial year for seasonally dependent agronomic operations undertaken during the following year, provided the expenditure is incurred on or before 30 June 2006. |
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