Product Ruling

PR 2008/29W

Income tax: ITC Hardwood Project 2008 (Pulpwood Option)

• Please note that the PDF version is the authorised version of this withdrawal notice.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Withdrawal

Product Ruling PR 2008/29 is withdrawn with effect from today.

1. Product Ruling PR 2008/29 sets out the Commissioner's opinion on the tax consequences for persons participating in the ITC Hardwood Project 2008 (Pulpwood Option) ('the Project'), a forestry managed investment scheme, entered into for the purpose of producing pulpwood.

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 This Product Ruling has been withdrawn in accordance with subsection 358-20(1) of Schedule 1 to the Taxation Administration Act 1953, which states the Commissioner may withdraw a public ruling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

3. On 2 September 2013, Growers voted in favour of a transaction for the termination or surrender of their interests in the Project ('the transaction') resulting in the Project being carried out in a materially different way from how it was described in the Ruling.

4. This withdrawal notice sets out the taxation treatment of amounts received by Growers under the transaction.

Taxation implications for Growers

5. The transaction resulted in a capital gains tax (CGT) event for the purpose of section 82KZMGB of the Income Tax Assessment Act 1936 (ITAA 1936). As a result, Growers are required to include the market value of their interests in the Project in their assessable income in the income year in which the CGT event happened (paragraph 82KZMGB(2)(a) of the ITAA 1936).

6. The Responsible Entity provided information to Growers to determine the market value of their interests for the purpose of section 82KZMGB of the ITAA 1936.

7. Having regard to the information provided by the Responsible Entity, the Commissioner considers that the transactions occurred due to circumstances outside the control of individual Grower's that could not have been reasonably foreseen at the time Growers acquired their interests in the Project. Therefore, the transaction does not disturb the tax treatment of Growers' previous outgoings as set out in PR 2008/29 provided that the Project was carried out in the manner described in the Ruling up until the date the transaction was implemented.

8. Growers ceased to carry on a business of primary production from the 2013-14 income year. Therefore, the non-commercial loss rules contained in Division 35 of the Income Tax Assessment Act 1997 (ITAA 1997) have no application for the 2013-14 and later income years.

9. Paragraph 28 of PR 2008/29 ruled that Growers can claim deductions for interest incurred under a loan agreement with ITC Finance Pty Ltd or the Nominated Financier as described at paragraphs 84 to 89 of PR 2008/29. 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.

Commissioner of Taxation
11 June 2014

© 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 in draft form.

References

ATO references:
NO 1-5DYJ3WY

Related Rulings/Determinations:

TR 97/7
TR 97/11
TR 98/22
TR 2000/8
TD 2003/12
TR 2007/6
PR 2008/28

Subject References:
borrowing expenses
carrying on a business
commencement of business
fee expenses
interest expenses
management fees
non-commercial losses
producing assessable income
product rulings
public rulings
tax avoidance
taxation administration

Legislative References:
ITAA 1936 82KL
ITAA 1936 Pt III Div 3 Subdiv H
ITAA 1936 82KZL
ITAA 1936 82KZL(1)
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 82KZMG
ITAA 1936 82KZMG(1)
ITAA 1936 82KZMG(2)
ITAA 1936 82KZMG(3)
ITAA 1936 82KZMG(4)
ITAA 1936 82KZMGA
ITAA 1936 82KZMGA(1)
ITAA 1936 82KZMGA(2)
ITAA 1936 82KZMGB
ITAA 1936 82KZMGB(1)(d)
ITAA 1936 82KZMGB(2)
ITAA 1936 82KZMGB(3)
ITAA 1936 Pt IVA
ITAA 1936 170
ITAA 1936 177A
ITAA 1936 177C
ITAA 1936 177D
ITAA 1936 177D(b)
ITAA 1997 6-10
ITAA 1997 8-1
ITAA 1997 10-5
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 40-880
ITAA 1997 40-880(1)
ITAA 1997 40-880(2)
ITAA 1997 Pt 3-1
ITAA 1997 118-20
ITAA 1997 328-110
ITAA 1997 995-1
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