Product Ruling PR 2009/10W
Status: withdrawn








Withdrawal notice: Product Ruling PR 2009/10 is withdrawn with effect from today. 1. This Product Ruling has been withdrawn in accordance with subsection 358-20(1) of Schedule 1 to the Taxation Administration Act 1953 , which states the Commissioner may withdraw a public ruling either wholly or to an extent. 2. Product Ruling PR 2009/10 set out the Commissioner's opinion on the tax consequences for persons participating in the ITC Diversified Forestry Project 2009 ('the Project'), a forestry managed investment scheme, entered into for the purpose of establishing and harvesting Pulpwood, Indian Sandalwood, Teak and Red Mahogany trees in Australia. 3. Elders Forestry Management Limited ('EFML', the Responsible Entity) advised that Elders Limited entered into transactions which resulted in the Project being carried out in a materially different way from how it was described in Product Ruling PR 2009/10. 4. EFML advised that the Red Mahogany plantations were destroyed as a result of natural disaster. Additionally, Growers voted in favour of a series of transactions resulting in the termination of the other interests in the Project. 5. In March 2013, Growers voted to receive payments from EFML for their Teak and Indian Sandalwood interests. On 3 September 2013, Growers voted to receive a payment from EFML for their remaining Pulpwood interests. 6. These transactions constitute a material difference in the way that the Project has been implemented. This withdrawal notice sets out the taxation treatment of amounts received by Growers under the transactions. Taxation implications for Growers 7. Each transaction results in a capital gains tax (CGT) event for the purpose of section 394-25 of the Income Tax Assessment Act 1997 (ITAA 1997). As a result, Growers will be required to include the market value or decrease in market value of their 'forestry interests' in their assessable income in the income year in which the CGT event happens (subsection 394-25(2) of the ITAA 1997). 8. The Responsible Entity will provide information to Growers to assist them determine the market value or decrease in market value of their 'forestry interests' for the purpose of section 394-25 of the ITAA 1997. 9. Deductions are not allowable under Division 394 of the ITAA 1997 where a CGT event happens to a Grower's 'forestry interest' before 1 July 2013 (subsection 394-10(5) of the ITAA 1997). However, deductions will not be affected where the CGT event happens because of circumstances outside the Grower's control and the Grower could not have reasonably foreseen the CGT event happening when they acquired the 'forestry interest' (subsection 394-10(5A) of the ITAA 1997). 10. Having regard to the information provided by the Responsible Entity, it is considered that the transactions are a result of circumstances outside individual Grower's control that could not have been reasonably foreseen at the time Growers acquired their interests in the Project. Therefore, the transactions do not disturb the tax treatment of Growers' previous outgoings as set out in PR 2009/10 provided that the Project was carried out in the manner described in the Ruling up until the date the transaction for the sale of the Pulpwood component of the Project was implemented. 11. Paragraph 32 of PR 2009/10 ruled that Growers can claim deductions for interest incurred under a loan agreement with Elders Forestry Finance Pty Ltd or the Preferred Financier as described at paragraphs 78 to 84 of PR 2009/10. Interest expenses will continue to be deductible provided Growers meet certain requirements outlined in TR 2004/4 Income tax : deductions for interest incurred prior to the commencement of, or following the cessation of, relevant income earning activities . © 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). Commissioner of Taxation 6 November 2013 Not previously issued as a draft

Related rulings: TR 97/7 TR 97/11 TR 98/22
Legislative references: ITAA 1936 82KL ITAA 1936 Pt III Div 3 Subdiv H ITAA 1936 82KZL ITAA 1936 82KZLA ITAA 1936 82KZM ITAA 1936 82KZMA ITAA 1936 82KZMB ITAA 1936 82KZMC ITAA 1936 82KZMD ITAA 1936 82KZME ITAA 1936 82KZMF ITAA 1936 Pt IVA ITAA 1936 170 ITAA 1936 177A ITAA 1936 177C ITAA 1936 177D ITAA 1936 177D(b) ITAA 1936 318 ITAA 1997 6-5 ITAA 1997 6-10 ITAA 1997 8-1 ITAA 1997 8-1(1) ITAA 1997 8-1(1)(a) ITAA 1997 8-1(2) ITAA 1997 8-1(2)(a) ITAA 1997 8-5 ITAA 1997 10-5 ITAA 1997 12-5 ITAA 1997 25-25 ITAA 1997 25-25(1) ITAA 1997 25-25(4) ITAA 1997 Div 35 ITAA 1997 Div 394 ITAA 1997 394-10 ITAA 1997 394-10(1) ITAA 1997 394-10(1)(c) ITAA 1997 394-10(1)(d) ITAA 1997 394-10(1)(e) ITAA 1997 394-10(1)(f) ITAA 1997 394-10(2) ITAA 1997 394-10(4) ITAA 1997 394-10(5) ITAA 1997 394-10(6) ITAA 1997 394-10(7) ITAA 1997 394-15(1) ITAA 1997 394-15(2) ITAA 1997 394-15(4) ITAA 1997 394-15(5) ITAA 1997 394-20 ITAA 1997 394-25 ITAA 1997 394-25(1)(c) ITAA 1997 394-25(2) ITAA 1997 394-25(3) ITAA 1997 394-30 ITAA 1997 394-35 ITAA 1997 394-35(1) ITAA 1997 394-35(2) ITAA 1997 394-35(3) ITAA 1997 394-35(4) ITAA 1997 394-35(5) ITAA 1997 394-35(6) ITAA 1997 394-35(7) ITAA 1997 394-35(8) ITAA 1997 394-40 ITAA 1997 394-45 ITAA 1997 995-1 TAA 1953 TAA 1953 Sch 1 394-10 SISA 1993 Copyright Act 1968 Corporations Act 2001
Case references: Australian National Hotels Ltd v. Federal Commissioner of Taxation (1988) 19 FCR 234 88 ATC 4627 (1988) 19 ATR 1575
Subject references: direct forestry expenditure DFE interest expenses forestry MIS forestry interest market value substitution rule payments under the scheme producing assessable income product rulings reasonable expectation tax avoidance taxation administration 4 year holding period 70 per cent DFE rule