Product Ruling

PR 2007/80W

Income tax: Macquarie Almond Investment 2007 - Late Growers (to 15 June 2008)

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Notice of Withdrawal

Product Ruling PR 2007/80 is withdrawn with effect from today.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 This Product Ruling has been withdrawn in accordance with subsection 358-20(1) of Schedule 1 to the Taxation Administration Act 1953, which states the Commissioner may withdraw a public ruling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 2007/80 set out the Commissioner's opinion on the tax consequences for persons participating (the Growers) in the Macquarie Almond Investment 2007 - Late Growers (to 15 June 2008) ('the Project'), a managed investment scheme, entered into for the purpose of establishing and harvesting Almond trees in Australia.

3. Macquarie Alternative Assets Management Ltd (MAAML) (the Responsible Entity) advised that in agreement with the Growers the almond orchards were sold on 17 August 2015 and the Project will be wound up.

4. The past deductions claimed by Growers, as set out in PR 2007/80, will not be denied provided that the Scheme was carried out in the manner described in the ruling up until the date the lease was surrendered.

5. The revenue from the sales of the Almonds from the 2015 Crop will be treated as assessable income by the Growers in a manner consistent with the existing Ruling, in the 2016 income year.

6. The surrender of the Project lease by MAAML, acting in its capacity as trustee for the Growers, will give rise to a capital gain on the effective date of the lease termination deeds, equal to the entire cash offer amount received by MAAML. The capital gain will be a discount capital gain.

7. Each Grower's share of the capital gain made by MAAML from the lease surrender is assessable income, in the income year in which the CGT event occurs. MAAML will provide each Grower with a statement detailing the calculation of their share of the capital gain and the discount applied, to assist them in meeting their own capital gains tax obligations.

8. As MAAML's capital gain will be a discount capital gain, each Grower will be required to:

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Gross up their share of the discount capital gain from MAAML by multiplying that amount by two

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apply any capital losses from other sources (if any) to the reduce the gain, and

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apply the appropriate discount percentage (if any) to any remaining amount.(under Subdivision 115-C of the Income Tax Assessment Act 1997 (ITAA 1997).

9. The appropriate percentage for a Grower who is an individual will be a 50% CGT discount, and for a Grower who is a complying superannuation entity it will be a 33^⅓% CGT discount (under Subdivision 115-B of the ITAA 1997).

10. Paragraphs 94 to 98 of PR 2007/80 set out how the Growers' participation in the Project constitutes the carrying on of a business of primary production by the Growers. Upon the sale of the almond orchards, on 17 August 2015, all Growers ceased to carry on a business of primary production in this project.

11. Following the surrender of the Leases, if a Grower has an outstanding loan and the interest incurred on the loans was previously deductible, interest expenditure will continue to be deductible (under section 8-1 of the ITAA 1997) even though they have ceased to carry on a business, provided Growers meet certain requirements.

12. These requirements are outlined in Taxation Ruling TR 2004/4.

13. Generally, where a business activity has ceased, ongoing interest will continue to be deductible unless an event or circumstance occurs to break the connection between the loan and the business activity. If you refinance, renegotiate or otherwise alter the purpose of the loan, the connection to the income earning activity may be broken and the interest may no longer be deductible.

Commissioner of Taxation
16 September 2015

© 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).

Not previously issued as a draft

References

ATO references:
NO 1-74U0XP6

Related Rulings/Determinations:

TR 97/7
TR 97/11
TR 98/22
TR 2000/8
TR 2001/14
TR 2002/6
PR2007/4

Subject References:
carrying on a business
non-commercial losses
producing assessable income
product rulings
public rulings
tax benefits under tax avoidance
schemes
tax shelters
tax shelters project
taxation administration

Legislative References:
ITAA 1936 82KL
ITAA 1936 Pt III Div 3 Subdiv H
ITAA 1936 82KZL
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 177A
ITAA 1936 177C
ITAA 1936 177D
ITAA 1936 177D(b)
ITAA 1997 6-5
ITAA 1997 8-1
ITAA 1997 17-5
ITAA 1997 25-25
ITAA 1997 25-25(1)
ITAA 1997 Div 27
ITAA 1997 Div 35
ITAA 1997 35-10
ITAA 1997 35-10(2)
ITAA 1997 35-55
ITAA 1997 35-55(1)(b)
ITAA 1997 40-530
ITAA 1997 40-545
TAA 1953
TAA 1953 Sch 1 357-75(1)
Copyright Act 1968
Corporations Act 2001
SISA 1993

Case References:
Commissioner of Taxation v. Lau
(1984) 6 FCR 202
84 ATC 4929
(1984) 16 ATR 55