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  • Information for promoters

    As a promoter, you must ensure your forestry managed investment scheme (MIS) meets the requirements of a qualifying scheme. This will allow investors to get the upfront deductions for their acquisition costs and subsequent contributions.

    Qualifying scheme requirements

    Reasonable expectation test

    The scheme will be defined as a qualifying scheme if it can be shown there is a reasonable expectation that direct forestry expenditure for the scheme will equal or exceed 70% of contributions by investors at 30 June of the income year in which an investor first makes a contribution to that scheme.

    70% direct forestry expenditure rule

    Direct forestry expenditure (DFE) is expenditure directly relating to establishing, tending, felling and harvesting of trees.

    A qualifying scheme is one where no less than 70% of investor contributions are used for DFE over the life of the project.

    Market value is to be substituted for the prices actually used in determining DFE where the transaction is not at arm's length, and the amount to be paid by the forestry manager under the scheme is, or will be, more or less than the market value of what the amount is for.

    Calculating net present value

    We accept that future costs can be increased by the consumer price index (CPI) before calculating the net present value of all costs for the DFE calculation. CPI rates are published by the Australian Bureau of Statistics and reproduced by us to provide figures based on 'All groups CPI weighted average of eight capital cities'.

    The amount spent on DFE over the life of the project will be determined in net present value terms. The discount rate used for calculating net present value is the yield on Australian Government Securities that are Treasury bonds with a maturity closest to 10 years (as published by the Reserve Bank of Australia). The forestry manager should use the current quoted rate as a proxy for the rate on 30 June.

    If the forestry manager is applying for an ATO product ruling they should use the current quoted rate at the time of the application, however we will use the latest quoted rate.

    See also:

    18-month establishment rule

    To be a qualifying scheme, trees must be established within 18 months of the end of the income year in which an amount is first paid under the scheme by an investor.

    If trees are not established within this 18-month period, the forestry manager must provide a statement to us showing why the trees were not established. This statement must be made in the approved failure to establish notification form, and submitted within three months after the end of the 18-month period.

    Starting a scheme

    The promoter, arranger or manager of a forestry managed investment scheme must provide a statement to us regarding the initial contributions to the scheme. It must be in the approved initial contributions notification form, and submitted within three months after the end of the income year in which the forestry manager receives the contributions.

    See also:

      Last modified: 01 Aug 2017QC 19576