ATO Interpretative Decision
ATO ID 2002/987 (Withdrawn)
Superannuation
Retirement income entities - leasehold interest in afforestation arrangementFOI status: may be released
-
This ATO ID is withdrawn and is replaced by ATO ID 2006/261.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
For the purpose of the definition of business real property in subsection 66(5) of the Superannuation Industry (Supervision) Act 1993 (SISA) does a leasehold interest include the trees in an afforestation arrangement?
Decision
Yes. A leasehold interest does include the trees where the afforestation arrangement only confers an equitable interest in the trees for the purpose of the definition of business real property in subsection 66(5) of the SISA.
Facts
Under the afforestation arrangement an investor enters into a lease and management agreement (the agreement) with a promoter.
The investor also enters into a contract with the promoter to have trees planted on the land and maintained until maturity.
When the trees reach maturity they are felled and sold.
The agreement provides that the investor shall at all times have full right, title and interest in the timber and the right to have that timber sold for their benefit.
Reasons for Decision
Business real property is defined in subsection 66(5) of the SISA and includes any leasehold interest in real property where the real property is used wholly and exclusively in one or more businesses. 'Business' is defined in subsection 66(5) of the SISA to include any profession, trade, employment, vocation or calling carried on for the purposes of profit including primary production and provision of professional services.
This arrangement is covered by a Product Ruling (PR 1999/16) issued by the Commissioner of Taxation. In that ruling, the Commissioner accepts that the investor who participates in this arrangement is carrying on a business for the purposes of the Income Tax Assessment Act 1997 (ITAA 1997). As the definition of business in the SISA is broader than that of the ITAA 1997, it must follow that the lease arrangement as being business real property as defined in subsection 66(5) of the SISA.
Where the investor has an interest in the land, on which, the trees are growing and full right, title and interest in the timber and the right to have it sold for their benefit, they have a profit a prendre in respect of the timber. The leasehold interest for the purposes of the definition of business real property in subsection 66(5) of the SISA, includes the trees.
Date of decision: 12 June 2001
Legislative References:
Superannuation Industry (Supervision) Act 1993
Subsection 66(5)
Product Ruling PR1999/16 Business Line: Superannuation Date of publication: 23 October 2002
ISSN: 1445-2782
| Date: | Version: | |
| 12 June 2001 | Original statement | |
| You are here | 22 September 2006 | Archived |