17 Forestry managed investment scheme deduction



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A forestry interest in an FMIS is a right to benefits produced by the scheme, whether the right is actual, prospective or contingent, and whether or not it is enforceable.

The forestry manager of an FMIS is the entity that manages, arranges or promotes the FMIS.

The trust is an initial participant in an FMIS if:

  • it obtained the forestry interest in the FMIS from the forestry manager of the scheme, and
  • the payment to obtain the forestry interest results in the establishment of trees.

The trust is a subsequent participant in an FMIS if it obtains an interest in through secondary market trading. This means it acquired its interest other than as an initial participant, usually by purchasing that interest from an initial participant in the scheme.

A trust may be entitled to claim a deduction at this item for payments made to an FMIS if:

  • the trust currently holds a forestry interest in an FMIS, or held a forestry interest in an FMIS during the 2013–14 income year, and
  • the trust paid an amount to a forestry manager of an FMIS under a formal agreement
  • the forestry manager has advised the trust that the FMIS satisfies the 70% direct forestry expenditure rule in Division 394 of the ITAA 1997
  • the trust 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
  • 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, and
  • the deduction is claimed in the income year in which the payment is made.

If the trust is an initial participant in an FMIS it can claim initial and ongoing payments at this item.

Excluded payments

The calculation of direct forestry expenditure does not include, among other things, any of the following payments made under FMIS (see section 394-10External Link and 394-40External Link of the ITAA 1997):

  • payments for borrowing money
  • 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 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)
  • marketing and sale of forestry produce.

Show at D the total amount of deductible payments made to an FMIS. The trust may claim a deduction for some of these expenses at another item.

Last modified: 30 Oct 2014QC 40282