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Product Ruling

PR 1999/98A - Addendum

Income tax: ITC Eucalyptus 1999 Esperance Project

FOI status:

May be released

Notice of Addendum

At paragraph 13, add:

•
ITC Tree Farm Loan Package including the Tree Farm Loan Deed;

Delete paragraph 29 and replace with:

29. Growers can fund their investment in the Project themselves, borrow from ITC Finance Pty Ltd (a lender associated with the Responsible Entity) or borrow from an independent lender.

29.1 This Ruling does not apply if a Grower entered into a finance agreement that includes or has any of the following features:

•
there are split loan features of a type referred to in Taxation Ruling TR 98/22;
•
there are indemnity arrangements or other collateral agreements in relation to the loan designed to limit the borrower's risk;
•
'additional benefits' are or will be granted to the borrowers for the purpose of section 82KL or the funding arrangements transform the Project into a 'scheme' to which Part IVA may apply;
•
the loan or rate of interest is non-arm's length;
•
repayments of the principal and payments of interest are linked to the derivation of income from the Project;
•
the funds borrowed, or any part of them, will not be available for the conduct of the Project but will be transferred (by any mechanism, directly or indirectly) back to the lender, or any associate of the lender;
•
lenders do not have the capacity under the loan agreement, or a genuine intention, to take legal action against defaulting borrowers; or
•
entities associated with the Project other than ITC Finance Pty Ltd are involved or become involved, in the provision of finance to Members for the Project.

Add to the Ruling part of the Product Ruling:

Division 35 - Deferral of losses from non-commercial business activities

Section 35-55 - Commissioner's discretion

31.1 For a 1999 Grower who is an individual and who entered the Project on or after 10 November 1999 and prior to any withdrawal of this Product Ruling the rule in section 35-10 may apply to the business activity comprised by their involvement in this Project. Under paragraph 35-55(1)(b) the Commissioner has decided for the income years ended 30 June 2001 to 30 June 2008 that the rule in section 35-10 does not apply to this business activity provided that the Project has been, and continues to be carried on in a manner that is not materially different to the arrangement described in this Ruling. For a 2000 Grower who is an individual and who entered the Project on or after 10 November 1999 and prior to any withdrawal of this Product Ruling the rule in section 35-10 may apply to the business activity comprised by their involvement in this Project. Under paragraph 35-55(1)(b) the Commissioner has decided for the income years ended 30 June 2001 to 30 June 2009 that the rule in section 35-10 does not apply to this business activity provided that the Project has been, and continues to be carried on in a manner that is not materially different to the arrangement described in this Ruling.

31.2 This exercise of the discretion in subsection 35-55(1) will not be required where, for any year in question:

•
a Grower's business activity satisfies one of the objective tests in sections 35-30, 35-35, 35-40 or 35-45; or
•
the 'Exception' in subsection 35-10(4) applies.

31.3 Where, either the Grower's business activity satisfies one of the objective tests, the discretion in subsection 35-55(1) is exercised, or the Exception in subsection 35-10(4) applies, section 35-10 will not apply. This means that a Grower will not be required to defer any excess of deductions attributable to their business activity in excess of any assessable income from that activity, ie, any 'loss' from that activity, to a later year. Instead, this 'loss' can be offset against other assessable income for the year in which it arises.

31.4 Growers are reminded of the important statement made on Page 1 of this Product Ruling. Therefore, Growers should not see the Commissioner's decision to exercise the discretion in paragraph 35-55(1)(b) as an indication that the Tax Office sanctions or guarantees the Project or the product to be a commercially viable investment. An assessment of the Project or the product from such a perspective has not been made.

Commissioner of Taxation
22 August 2001

References

ATO references:
NO T2000/13348

ISSN: 1441-1172

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