17 Forestry managed investment scheme deduction
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 2015–16 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. The trust cannot claim a deduction if it has disposed of its forestry interest in an FMIS within four years after the end of the income year in which it first made a payment. However, the deduction will be allowed if the disposal occurs because of circumstances outside of the trustee's control, provided the trustee could not have reasonably foreseen the disposal happening when they acquired the interest. Disposals that would generally be outside the trustee's control may include compulsory acquisition, insolvency of the trust or the scheme manager, or cancellation of the interest due to fire, flood or drought.
If the trust is a subsequent participant, it cannot claim a deduction for the amount paid for acquiring the interest. The trust 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 10 Forestry managed investment scheme income.
The trust cannot claim a deduction at this item for any of the following payments (see section 394-10 and 394-40 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.
The trust may claim a deduction for some of these expenses at another item.
Show at D the total amount of deductible payments made to an FMIS.
Last modified: 31 Aug 2016QC 48243