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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 it is enforceable or not.
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 a forestry managed investment scheme 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 able to claim a deduction at this item for payments made to a forestry managed investment scheme (FMIS) if it:
- currently holds a forestry interest in an FMIS, or held a forestry interest in an FMIS during the income year, and
- paid an amount to a forestry manager of an FMIS under a formal agreement.
If the trust is an initial participant it can claim initial and ongoing payments at this item.
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 trust can only claim a deduction at this item if the forestry manager has advised you that the FMIS satisfies the 70% direct forestry expenditure rule in Division 394External Link of the ITAA 1997.
If the trust is an initial participant, it cannot claim a deduction if it disposed of the forestry interest in an FMIS within four years after the end of the income year in which a payment was first made.
However, where the disposal occurs because of circumstances outside the control of the trust, the deduction will be allowed, provided that the trust could not have reasonably foreseen the disposal happening when it acquired the interest. Disposals that would be outside the trust's control include compulsory acquisition, insolvency of the trust or the scheme manager, or cancellation of the interest due to fire, floor or drought.
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
- 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.
Last modified: 05 Jul 2014QC 35444