Product Ruling

PR 2004/77A - Addendum

Income tax: W.A. Blue Gum Project 2004

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FOI status:

may be released

Addendum

This Addendum amends Product Ruling PR 2004/77 to reflect changes to simplified tax system legislation from 2005-06 onwards.

PR 2004/77 is amended as follows:

1. Paragraph 64

Replace the paragraph with

64. To be an 'STS taxpayer' a Grower must be eligible to be an 'STS taxpayer' and must have elected to be an 'STS taxpayer'. Changes to the STS rules apply from 1 July 2005. From that date, STS taxpayers may use the accruals accounting method or can continue to use the cash accounting method (called the 'STS accounting method' - see section 328-125).

2. Paragraph 67

Replace the paragraph with:

67. Other than Growers referred to in paragraph 68, a Grower is assessable on ordinary income from carrying on their business of afforestation in the income year in which that income is derived.

3. Paragraph 68

Replace the paragraph with:

68. A Grower who is an 'STS taxpayer' continuing to use the cash accounting method is assessable on ordinary income from carrying on their business of afforestation in the income year in which that income is received.

4. Paragraph 71

(a) Replace the paragraph with:

71. For all Growers who are 'STS taxpayers' (for the 2003-04 and 2004-05 income years) and for those Growers who are 'STS taxpayers' that continue to use the cash accounting method (for the 2005-06 and 2006-07 income years):

•

an amount shown in the table below that is not paid in the year it is incurred is only deductible to the extent to which it has been paid; and

•

any amount or part of an amount shown in the table which is not paid in the year in which it is incurred will be deductible in the year in which it is actually paid.

For Growers who are 'STS taxpayers' using the accruals accounting method, expenditure incurred in the 2005-06 and 2006-07 income years is deductible in full in those years.

(b) In the table, replace the fourth row with:

(c) Replace Note (iii) with:

(iii) The management fees and 'Rent' are deductible in full in the year in which they are incurred where the Grower is not an ' STS taxpayer' .

For the 2003-04 and 2004-05 income years, the management fees and 'Rent' are deductible in full in the year in which they are paid where the Grower is an ' STS taxpayer' .

For the 2005-06 and 2006-07 income years, the management fees and 'Rent' are deductible in full in the year in which they are incurred where the Grower is an ' STS taxpayer' using the accruals accounting method or in the year in which they are paid where the Grower is an ' STS taxpayer' continuing to use the cash accounting method.

5. Paragraph 72

Insert after 'is not an 'STS taxpayer':

or, from the 2005-06 income year, who is an 'STS taxpayer' using the accrual accounting method

6. Paragraph 73

Replace the paragraph with:

73. Where either or both of the 'Joint Venture Growers' is an 'STS taxpayer' (for the 2004-05 income year) or is an 'STS taxpayer' that continues to use the cash accounting method (from the 2005-06 income year), the deductions referred to in paragraph 71 are deductible in the income year in which they are paid.

7. Paragraph 103

Replace the paragraph with:

103. Under the Arrangement to which this Product Ruling applies management fees and 'Rent' are incurred annually and interest is payable to Albany Financial and the Introduced Lender either monthly or twice yearly. Accordingly, the prepayment provisions in sections 82KZME and 82KZMF have no application to this arrangement. A Grower who is not an 'STS taxpayer' can, therefore, claim a deduction for each of the relevant amounts in the income year in which the fee is incurred. A Grower who is an 'STS taxpayer' (for the 2003-04 and 2004-05 income years) or is an 'STS taxpayer' who continues to use the cash accounting method (for the 2005-06 and 2006-07 income years) can claim a deduction for each of the relevant amounts in the year in which the amount is paid. A Grower who is an 'STS taxpayer' that uses the accruals accounting method (for the 2005-06 and 2006-07 income years) can claim a deduction for each of the relevant amounts in the year in which the amount is incurred.

This Addendum applies on and from 1 July 2005.

Commissioner of Taxation
7 December 2005

References

ATO references:
NO 2003/11684