U Forestry managed investment scheme deduction

Show at U the total amount of deductible payments made under an FMIS.

The fund may be entitled to claim a deduction at U for payments made under an FMIS if:

  • the fund currently holds a forestry interest in an FMIS, or held a forestry interest in an FMIS during 2015–16
  • the fund paid an amount to a forestry manager of an FMIS under a formal agreement
  • the forestry manager has advised the fund that the FMIS satisfies the 70% direct forestry expenditure rule in Division 394 of the ITAA 1997
  • the fund does not have day to day control over the operation of the scheme
  • there is more than one participant in the scheme or, the forestry manager or an associate of the forestry manager manages, arranges or promotes similar schemes
  • all the trees are established within 18 months of the end of the income year in which an amount is first paid under the FMIS by a participant in the scheme.

If the fund is an initial participant in an FMIS it can claim a deduction for initial and ongoing payments at this item. The fund cannot claim a deduction if a CGT event happens in relation to its forestry interest in an FMIS within four years after the end of the income year in which it first made a payment under the FMIS. However, the deduction will not be denied for that reason if the CGT event happens because of circumstances outside of the fund's control, provided the fund could not have reasonably foreseen the CGT event happening when it acquired the interest. CGT events happening that would generally be outside the fund's control may include compulsory acquisition, insolvency of the fund or the scheme manager, or cancellation of the interest due to fire, flood or drought.

If the fund is a subsequent participant, it cannot claim a deduction for the amount paid to acquire the interest. The fund can only claim a deduction for ongoing payments.

The deduction is claimed in the income year in which the payment is made.

Relevant terms are explained at X Forestry managed investment scheme income item 10.

Excluded payments

The fund cannot claim a deduction at U for any of the following:

  • payments for borrowing money
  • payments of interest and payments in the nature of interest (such as a premium on repayment or redemption of a security, or a discount of a bill or bond)
  • payments of stamp duty
  • payments of GST
  • payments that relate to the transportation and handling of felled trees after the earliest of the following    
    • sale of the trees
    • arrival of the trees at the mill door
    • arrival of the trees at the port
    • arrival of the trees at the place of processing (other than where processing happens in-field)
  • payments that relate to processing
  • payments that relate to stockpiling (other than in-field stockpiling)
  • payments that relate to marketing and sale of forestry produce.

While the payments are not deductible under Division 394 of the ITAA 1997, the payments may be deductible under other provisions of the ITAA 1997 or ITAA 1936 and claimable at other labels.

Last modified: 15 Jul 2016QC 48112