Product Ruling PR 2021/15
Date of effect: 1 July 2021

What this ruling is about: 1. This Product Ruling sets out the Commissioner's opinion on the way in which the relevant provisions identified in the Ruling section apply to the defined class of entities that participates in the scheme to which this Product Ruling relates. All legislative references in this Product Ruling are to the Income Tax Assessment Act 1936, unless otherwise indicated. 2. The scheme described in this Product Ruling involves a prepayment by a Customer (as defined in paragraph 18 of this Product Ruling) under a Prepay Plus Agreement (the Agreement) offered by Nutrien Ag Solutions Limited [1] (Nutrien) to purchase goods and/or services to be used by the Customer in their business. 3. This Product Ruling does not address:

Class of entities or scheme: 4. This part of the Product Ruling specifies which entities can rely on the Ruling section of this Product Ruling and which entities cannot rely on the Ruling section. Those entities that can rely on the Ruling section are referred to in this Product Ruling as the 'Customer'. 5. The class of entities that can rely on the Ruling section of this Product Ruling consists of those entities that: 6. The class of entities that can rely on the Ruling section of this Product Ruling does not include entities that: | Superannuation Industry (Supervision) Act 1993: 7. This Product Ruling does not address the provisions of the Superannuation Industry (Supervision) Act 1993 (SISA). The Commissioner gives no assurance that the scheme is an appropriate investment for a superannuation fund. The trustees of superannuation funds are advised that no consideration has been given in this Product Ruling as to whether investment in this scheme may contravene the provisions of the SISA. | Qualifications: 8. The class of entities defined in this Product Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 16 to 21 of this Product Ruling. 9. If the scheme actually carried out is materially different from the scheme that is described in this Product Ruling, then this Product Ruling:

Ruling: 1. This Product Ruling sets out the Commissioner's opinion on the way in which the relevant provisions identified in the Ruling section apply to the defined class of entities that participates in the scheme to which this Product Ruling relates. All legislative references in this Product Ruling are to the Income Tax Assessment Act 1936, unless otherwise indicated. 2. The scheme described in this Product Ruling involves a prepayment by a Customer (as defined in paragraph 18 of this Product Ruling) under a Prepay Plus Agreement (the Agreement) offered by Nutrien Ag Solutions Limited [1] (Nutrien) to purchase goods and/or services to be used by the Customer in their business. 3. This Product Ruling does not address: | Class of entities: 4. This part of the Product Ruling specifies which entities can rely on the Ruling section of this Product Ruling and which entities cannot rely on the Ruling section. Those entities that can rely on the Ruling section are referred to in this Product Ruling as the 'Customer'. 5. The class of entities that can rely on the Ruling section of this Product Ruling consists of those entities that: 6. The class of entities that can rely on the Ruling section of this Product Ruling does not include entities that: | Superannuation Industry (Supervision) Act 1993: 7. This Product Ruling does not address the provisions of the Superannuation Industry (Supervision) Act 1993 (SISA). The Commissioner gives no assurance that the scheme is an appropriate investment for a superannuation fund. The trustees of superannuation funds are advised that no consideration has been given in this Product Ruling as to whether investment in this scheme may contravene the provisions of the SISA. | Qualifications: 8. The class of entities defined in this Product Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 16 to 21 of this Product Ruling. 9. If the scheme actually carried out is materially different from the scheme that is described in this Product Ruling, then this Product Ruling:


Appendix: Section 8-1 - deductibility of the Prepayment Amount: 22. A loss or outgoing is deductible under section 8-1 of the ITAA 1997 if it is necessarily incurred in carrying on a business for the purpose of gaining or producing a taxpayer's assessable income. The expenditure must be part of the cost of trading operations and must not be of a capital, private or domestic nature. 23. An outgoing incurred by a business will be 'necessarily incurred' where, in the circumstances, it is reasonably capable of being seen as desirable or appropriate from the point of view of the pursuit of the business ends of the business being carried on for the purpose of earning assessable income (see Magna Alloys & Research Pty Ltd v. Commissioner of Taxation of the Commonwealth of Australia [1980] FCA 180). 24. Upon entry into the Agreement the Prepayment Amount is both immediately due and non-refundable such that the Customer becomes definitively committed to, and incurs, the Prepayment Amount. As the Prepayment Amount is incurred for the purchase of goods and/or services to be used in the Customer's farming business, it constitutes expenditure which is clearly appropriate from the point of view of the pursuit of the business ends of the Customer's business and is therefore 'necessarily incurred' in the carrying on of that business. 25. The Prepayment Amount necessarily incurred by the Customer to purchase goods and/or services in the course of carrying on its business is not of a capital, private or domestic nature. The deduction for the Prepayment Amount is allowable under section 8-1 of the ITAA 1997 in the income year the payment is made to Nutrien (that is, at the time it is necessarily incurred). | Section 82KZM - prepaid expenditure incurred by certain small business entities and individuals incurring non-business expenditure: 26. Subject to paragraph 27 of this Product Ruling, section 82KZM operates to spread over more than one income year a deduction which, apart from that section, would be allowable under section 8-1 of the ITAA 1997 for the year of income in which the prepaid expenditure (other than excluded expenditure as defined in subsection 82KZL(1)) is incurred under an agreement by a taxpayer that is either: 27. Section 82KZM applies if the eligible service period for the expenditure is longer than 12 months, or the eligible service period for the expenditure is 12 months or shorter but ends after the last day of the year of income after the one in which the expenditure was incurred. 28. In relation to the Prepayment Amount incurred by the Customer under the Agreement, the eligible service period for the purpose of section 82KZM is the period to which the Prepayment Amount relates. That period is: 29. The eligible service period in relation to the deductible Prepayment Amount under the Agreement is, pursuant to paragraph 27 of this Product Ruling, 12 months or less. As it is not more than 12 months and does not end after the last day of the year of income after the one in which the expenditure was incurred, section 82KZM will have no application to Customers that (as assumed at paragraph 21 of this Product Ruling) are a small business entity (or an entity covered by subsection 82KZM(1A)) for the year of income and have not chosen to apply section 82KZMD to the expenditure. © 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


What this Ruling is about | If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. | Potential participants must form their own view about the commercial and financial viability of the product. The Commissioner recommends a financial (or other) adviser be consulted for such information. | This Product Ruling provides certainty for potential participants by confirming that the tax benefits set out in the Ruling part of this document are available, provided that the scheme is carried out in accordance with the information we have been given, and have described below in the Scheme part of this document. If the scheme is not carried out as described, participants lose the protection of this Product Ruling. | Date of effect: 10. This Product Ruling applies from 1 July 2021. It therefore applies only to the specified class of entities that enter into the scheme from 1 July 2021 until 30 June 2024, being its period of application. This Product Ruling will continue to apply to those entities even after its period of application has ended for the scheme entered into during the period of application. | 11. However, the Product Ruling only applies to the extent that there is no change in the scheme or in the entity's involvement in the scheme. | Changes in the law: 12. Although this Product Ruling deals with the income tax laws enacted at the time it was issued, later amendments may impact on this Product Ruling. Any such changes will take precedence over the application of this Product Ruling and, to that extent, this Product Ruling will have no effect. | 13. Entities that are considering participating in the scheme are advised to confirm with their tax adviser that changes in the law have not affected this Product Ruling since it was issued. | Note to promoters and advisers: 14. Product Rulings were introduced for the purpose of providing certainty about tax consequences for entities in schemes such as this. In keeping with that intention, the Commissioner suggests that promoters and advisers ensure that participants are fully informed of any legislative changes after the Product Ruling has issued. | 15. Subject to paragraph 3 of this Product Ruling and the assumptions in paragraph 21 of this Product Ruling: | 16. The scheme that is the subject of this Product Ruling is identified and described in the following: | Note: Certain information has been provided on a commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation. | 17. For the purposes of describing the scheme to which this Product Ruling applies, there are no other agreements, whether formal or informal, and whether or not legally enforceable, which a Customer, or any associate of a Customer will be a party to, which are a part of the scheme. Unless otherwise defined, capitalised terms in this Product Ruling take their meaning from an Agreement referred to in paragraph 16 of this Product Ruling. | Overview: 18. The Agreement constitutes an agreement between a customer of Nutrien (the Customer) and Nutrien. The Agreement is, amongst other things, designed to assist in providing the Customer more effective cash flow management, enabling them to time the payment for goods and/or services with their major agricultural sale periods. | 19. Pursuant to the terms and conditions of the Agreement: | 20. The Prepayment Amount shall be a minimum of $10,000 and a maximum of $5 million (or any such other amount as agreed by Nutrien in its absolute discretion). | Assumptions: 21. This Product Ruling is made on the basis of the following necessary assumptions: | Commissioner of Taxation 24 November 2021


Legislative references: ITAA 1936 Pt III Div 3 Subdiv H ITAA 1936 82KZL(1) ITAA 1936 82KZM ITAA 1936 82KZM(1A) ITAA 1936 82KZMD ITAA 1936 Part IVA ITAA 1997 8-1 ITAA 1997 Div 230 ITAA 1997 328-110 TAA 1953 Corporations Act 2001 50 Corporations Act 2001 95A SISA 1993
Case references: Magna Alloys and Research Pty Ltd v. Commissioner of Taxation of the Commonwealth of Australia [1980] FCA 180 80 ATC 4542 11 ATR 276 33 ALR 213 49 FLR 183