Forestry managed investment schemes (Division 394)
Rules about deductions for contributions to a forestry managed investment scheme (MIS) where that scheme is a qualifying scheme came into effect from 1 July 2007. The aim is to encourage the expansion of commercial plantation forestry in Australia through the establishment and tending of new plantations for felling.
If you are an initial participant in a qualifying forestry MIS you can deduct amounts in the year of payment.
The treatment of a qualifying forestry MIS also allows for secondary-market trading of interests in such schemes. As a result, there are two different types of investors:
- initial participants – who can claim statutory deductions
- subsequent participants – who cannot claim a statutory deduction and hold the forestry interest on capital account (unless held as trading stock).
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To be considered a qualifying scheme, the forestry manager needs to show both of the following:
- there is a reasonable expectation at least 70% of investor contributions will be spent on direct forestry costs during the life of the project
- the plantation is established as intended within 18 months of the end of the income year in which an amount is first paid under the scheme by an investor.
Forestry managers need to notify us when they first receive a contribution from an initial participant in a qualifying scheme.
Forestry managers also need to tell us if the plantation is not established as intended within the required 18 month period.
Investigate before you invest
You need to investigate any schemes before you invest – be cautious about schemes that promise substantial tax benefits. If an investment seems too good to be true, it probably is.
Early termination of an agribusiness (forestry) managed investment schemes
There may be tax consequences if you are a participant in a forestry managed investment scheme (MIS) that is to be terminated or has been wound up early.
If we have previously issued a product ruling on the tax consequences for participants of a forestry MIS, whether it is a Division 394 forestry managed investment scheme or not, you can find both specific and general guidance on what you need to do.
You can check the status of your forestry agribusiness by accessing the Tables of affected schemes (XLS, 517KB)This link will download a file or phoning us on 1800 177 006.