Product Ruling

PR 2008/68W

Income tax: Gunns Plantations Woodlot Project 2009 - Option 3

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Notice of Withdrawal

Product Ruling PR 2008/68 is withdrawn with effect from today.

1. Product Ruling PR 2008/68 set out the Commissioner's opinion on the tax consequences for persons participating in the Gunns Plantation Woodlot Project 2009 - Option 3 (the Project), a forestry managed investment scheme, entered into for the purpose of the establishment and tending of Pine trees for felling in Australia.

2. This Product Ruling has been withdrawn in accordance with subsection 358 20(1) of Schedule 1 to the Taxation Administration Act 1953, which states the Commissioner may withdraw a public ruling either wholly or to an extent.

3. All legislative references in this withdrawal notice are to the Income Tax Assessment Act 1997 (ITAA 1997) unless otherwise indicated.

Overview

4. The Responsible Entity, Gunns Plantations Limited (in liquidation) advised that as part of the liquidation process of this entity, the Growers' interests in the Project ('forestry interests') were disposed of, by 11 September 2015.

5. This withdrawal notice sets out the tax outcomes for Growers or their associates arising as a consequence of the disposal of their 'forestry interest'.

Assessable Income

6. For the purposes of section 394 25, the disposal of a Grower's 'forestry interest' is a Capital Gains Tax (CGT) event. Growers are required to declare the market value of their 'forestry interest' at the time of the CGT event in their assessable income.

7. For the purposes of section 6 5, Growers are required to include their share of the harvest proceeds and other amounts payable to the Growers under the liquidation process, in their assessable income in the year they are derived.

8. The final amount to be distributed to the Growers by the liquidator (The Net Distribution Amount) will not be known until just prior to the distribution. This will occur when all costs and competing claims have been finalised as part of the liquidation process.

9. As a consequence, there was no simple way for Growers to determine the market value of their 'forestry interests', at the time of disposal.

10. Notwithstanding the requirement to return the market value of the forestry interest as assessable income in the year in which the CGT event happened and the requirement to return harvest proceeds and the other amounts referred to in paragraph 7 in the year in which they are derived, the Commissioner will accept that Growers in the Project, can:

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treat The Net Distribution Amount as the amount required to be returned as assessable income, and

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return The Net Distribution Amount, in their assessable income in the income tax year in which the distribution is received.

11. Class Ruling CR 2016/19 Income tax: liquidation - Great Southern Plantation and Gunns Plantations Limited Woodlot Schemes, sets out the tax outcomes for Growers or their associates arising as a consequence of the disposal of their 'forestry interest'.

Deductions

12. Although not relevant for the purposes of Division 394, a Grower that had intended to stay in the Project until it was completed was considered to be carrying on a business of primary production.

13. Growers in the Project that continued to hold a 'forestry interest', as defined by Division 394, up until 11 September 2015 were entitled to claim deductions for the expenditure outlined in paragraphs 28 to 36 of Product Ruling PR 2008/68.

14. Any expenditure that a Grower incurred prior to 11 September 2015 but did not actually pay is not deductible, because these amounts have been taken into account in calculating The Net Distribution Amount.

15. From 11 September 2015, Growers in the Project ceased to hold 'forestry interests' and ceased to be carrying on a business of primary production, and are no longer entitled to claim deductions, with the exception of interest which may continue to be deductible. See paragraph 18.

Deferral of losses from non commercial business activities

16. Division 35 only applies to individuals, alone or in partnership, in income years in which they are carrying on a business activity. In PR 2008/68, the Commissioner conditionally undertook to exercise his discretion under paragraphs 35 55(1)(b) or 35 55(1)(c), to allow losses incurred by Growers to be offset against other assessable income in the income year in which the losses arise, for the relevant income years.

17. The Commissioner's discretion under paragraphs 35 55(1)(b) and 35 55(1)(c) is no longer required in respect to the Projects for the year in which the Growers' 'forestry interests' were disposed of, and for later income years.

Interest

18. Where Growers have used loans to finance their participation in the Project, any interest incurred on the loan will continue to be deductible under section 8 1 in the year it is incurred, provided the requirements outlined in Taxation Ruling TR 2004/4 are satisfied.

19. The deductibility of interest on such loans is unaffected by the loss deferral rules in Division 35, from the year in which the Growers dispose of their interests in the Project, and for later income years. See paragraphs 16 and 17.

Commissioner of Taxation
20 April 2016

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Not previously issued as a draft

References

ATO references:
NO 1-7MS5QMP

Related Rulings/Determinations:

TR 97/7
TR 98/22
GSTR 2008/D1

Subject References:
4 year holding period
70 per cent DFE rule
carrying on a business
DFE
direct forestry expenditure
forestry interest
forestry MIS
interest expenses
managed investment schemes
market value substitution rule
payments under the scheme
producing assessable income
product rulings
reasonable expectation
tax avoidance
taxation administration

Legislative References:
ITAA 1936 82KL
ITAA 1936 Pt III Div 3 Subdiv H
ITAA 1936 82KZL
ITAA 1936 82KZLA
ITAA 1936 82KZM
ITAA 1936 82KZMA
ITAA 1936 82KZMB
ITAA 1936 82KZMC
ITAA 1936 82KZMD
ITAA 1936 82KZME
ITAA 1936 82KZMF
ITAA 1936 Pt IVA
ITAA 1936 170
ITAA 1936 177A
ITAA 1936 177C
ITAA 1936 177D
ITAA 1936 177D(b)
ITAA 1936 318
ITAA 1997
ITAA 1997 6-5
ITAA 1997 6-10
ITAA 1997 8-1
ITAA 1997 8-1(1)
ITAA 1997 8-1(1)(a)
ITAA 1997 8-1(2)
ITAA 1997 8-1(2)(a)
ITAA 1997 8-5
ITAA 1997 10-5
ITAA 1997 12-5
ITAA 1997 25-25
ITAA 1997 25-25(1)
ITAA 1997 25-25(4)
ITAA 1997 Subdiv 27-A
ITAA 1997 Div 35
ITAA 1997 Div 394
ITAA 1997 394-10
ITAA 1997 394-10(1)
ITAA 1997 394-10(1)(c)
ITAA 1997 394-10(1)(d)
ITAA 1997 394-10(1)(e)
ITAA 1997 394-10(1)(f)
ITAA 1997 394-10(2)
ITAA 1997 394-10(4)
ITAA 1997 394-10(5)
ITAA 1997 394-10(6)
ITAA 1997 394-10(7)
ITAA 1997 394-15(1)
ITAA 1997 394-15(2)
ITAA 1997 394-15(4)
ITAA 1997 394-15(5)
ITAA 1997 394-20
ITAA 1997 394-25
ITAA 1997 394-25(1)(c)
ITAA 1997 394-25(2)
ITAA 1997 394-25(3)
ITAA 1997 394-30
ITAA 1997 394-35
ITAA 1997 394-35(1)
ITAA 1997 394-35(2)
ITAA 1997 394-35(3)
ITAA 1997 394-35(4)
ITAA 1997 394-35(5)
ITAA 1997 394-35(6)
ITAA 1997 394-35(7)
ITAA 1997 394-35(8)
ITAA 1997 394-40
ITAA 1997 394-45
ITAA 1997 995-1
TAA 1953
TAA 1953 Sch 1 357-75(1)
TAA 1953 Sch 1 394-10
SISA 1993
Copyright Act 1968
Corporations Act 2001

Case References:
Australian National Hotels Ltd v. Federal Commissioner of Taxation
(1988) 19 FCR 234
88 ATC 4627
(1988) 19 ATR 1575

Ronpibon Tin NL v. Federal Commissioner of Taxation
(1949) 78 CLR 47
(1949) 8 ATD 431
Fletcher & Ors v. Federal Commissioner of Taxation
(1991) 173 CLR 1
91 ATC 4950
(1991) 22 ATR 613
Federal Commissioner of Taxation v. Roberts
(1992) 37 FCR 246
92 ATC 4380
(1992) 23 ATR 494
Steele v. Federal Commissioner of Taxation
(1999) 197 CLR 459
99 ATC 4242
(1999) 41 ATR 139