ATO Interpretative Decision

ATO ID 2003/488 (Withdrawn)

Income Tax

Does the existence of an option to sell trees before harvesting affect the operation of section 82KZMG?
FOI status: may be released

This ATO ID is withdrawn from the database because it contains a view in respect of section 82KZMG of the Income Tax Assessment Act 1936. That section does not apply for the 2008-09 income year and later income years. This ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2007-08 income year.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Does the concession in section 82KZMG of the Income Taxation Assessment Act 1936 (ITAA 1936) that facilitates an immediate deduction for certain prepaid expenditure incurred under a plantation forestry managed agreement apply if the agreement contains an option to sell those trees planted and tended for felling to another entity before harvesting?

Decision

Yes. The concession in section 82KZMG of the ITAA 1936 will still apply even if another entity buys the trees for felling.

Facts

A taxpayer prepays an investment of $10,000 in a plantation forestry managed agreement to plant and tend trees for felling. The agreement has an option to sell the trees before they are harvested. The prepaid investment relates to seasonally dependent agronomic activities that must be undertaken by the manager during the establishment period. If the option is exercised the trees may be harvested by another entity.

Reasons for Decision

Paragraph 82KZMG(3)(a) of the ITAA 1936 provides that the concession applies where the agreement is for the planting and tending of trees for felling. There is no requirement that the entity planting and tending the trees for felling be the same entity that harvests the trees. Although they may be harvested by another entity, the trees are still being grown for felling.

Accordingly, the test in paragraph 82KZMG(3)(a) of the ITAA 1936 is satisfied.

Date of decision: 11 June 2003

Year of income: Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1936
section 82KZMG
paragraph 82KZMG(3)(a)

Related Public Rulings (including Determinations)
Taxation Determination TD 2003/12

Related ATO Interpretative Decisions
ATO ID 2003/487

Keywords
Advance expenses & payments for certain forestry expenditure
Deductions & expenses
Forestry agreement
Seasonally dependent agronomic activity

Business Line: Finance and Investment Centre of Expertise

Date of publication: 27 June 2003

ISSN: 1445-2782

history

	Date:	Version:
	11 June 2003	Original statement
You are here	6 July 2012	Archived

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