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U Forestry managed investment scheme deduction

Last updated 12 February 2019

The fund may be able to claim a deduction at U for payments made to an FMIS, including payments made to acquire its interest in the FMIS, if:

  • the fund currently holds a forestry interest in an FMIS, or held a forestry interest in an FMIS during the 2010-11, and
  • the fund paid an amount to a forestry manager of an FMIS under a formal agreement.

The fund can claim a deduction at U only if the forestry manager has advised the fund that the FMIS satisfies the 70% direct forestry expenditure rule in Division 394 of the ITAA 1997.

The fund 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 unless the disposal occurred because of circumstances outside of the fund's control, provided the fund could not have reasonably foreseen the disposal happening when it acquired the interest. Disposals that would generally be outside the fund's control include:

  • compulsory acquisition
  • insolvency of the fund or the scheme manager
  • cancellation of the interest in the FMIS because of trees being destroyed by fire, flood or drought.

If the fund is an initial participant it can claim at this item initial and ongoing payments made as an initial participant of the FMIS.

If the fund is a subsequent participant, it cannot claim a deduction for the amount paid for acquiring the interest. The fund can only claim a deduction for ongoing payments.

The fund is an initial participant in an FMIS if:

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

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

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

Excluded payments

The fund cannot claim a deduction at U for any of the following payments:

  • 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 the 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, or
    • arrival of the trees at the place of processing (other than where processing happens in-field)
  • payments that relate to processing, and
  • payments that relate to stockpiling (other than in-field stockpiling).

Show at U the total amount of deductible payments made to an FMIS.