Product Ruling PR 2005/109W
Status: withdrawn
Date of withdrawal: 1 July 2008

What this ruling is about: 1. Product Ruling PR 2005/109 set out the Commissioner's view on the tax consequences for entities who participated as 2006 Growers in the Palandri Winegrape Project 2005 (the Project) by entering into a Lease and Management Agreement for the purpose of carrying on a commercial viticulture business. The Ruling was withdrawn on 1 July 2008 as interests in the Project were no longer being sold. 2. Although withdrawn, the Ruling continues to apply to Growers who were accepted to participate in the Project between 19 October 2005 and 15 June 2006. It therefore could be relied upon subject to there being no material difference in the arrangement, or in the Growers' involvement in the arrangement. 3. PR 2005/109 ruled that Growers could claim deductions for specified Project expenses although the deductibility of losses was subject to the non-commercial loss rules in Division 35 of the Income Tax Assessment Act 1997 (Division 35). The Commissioner exercised his discretion to allow losses to be offset against other assessable income until the 2009-10 income year. 4. On 24 September 2008 the Supreme Court of Western Australia ordered that the scheme be wound up. The termination of the Project's Agreements constituted a material difference to the scheme described in PR 2005/109 and meant that Growers were no longer carrying on their own business. 5. For the 2008-09 year, Growers may offset any losses incurred from the Project until 19 March 2009, the date the agreements were terminated. After that date, losses are no longer subject to Division 35, although no further Project fees were incurred from that date. 6. Whilst Growers will not be carrying on business after the termination of their agreements, those financing their participation in the Project may have incurred interest expenses after 19 March 2009. Where a business activity has ceased, ongoing interest will continue to be deductible unless an event or circumstance occurs to break the connection between the loan and the business activity. Where a loan is refinanced, renegotiated or the purpose of the loan is otherwise altered, the connection to the income earning activity may be broken and the interest may no longer be deductible. For more information refer to paragraph 50 of Taxation Ruling TR 2004/4 which provides guidance on what needs to be considered to determine if the necessary connection still exists following the cessation of relevant income earning activities. Commissioner of Taxation 19 October 2005 Not previously issued as a draft






Preamble: The number, subject heading, What this Product Ruling is about (including Tax law(s), Class of persons and Qualifications sections), Date of effect, Withdrawal, Arrangement and Ruling parts of this document are a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953. Product Ruling PR 1999/95 explains Product Rulings and Taxation Rulings TR 92/1 and TR 97/16 together explain when a Ruling is a 'public ruling' and how it is binding on the Commissioner. | [ Note: This is a consolidated version of this document. Refer to the ATO Legal Database (http://law.ato.gov.au) to check its currency and to view the details of all changes.]


Related rulings: IT 360 PR 1999/95 PR 2005/83 PR 2005/107 TD 93/34 TR 92/1 TR 92/20 TR 97/11 TR 97/16 TR 98/22 TR 2000/8 TR 2001/14
Legislative references: ITAA 1936 82KL ITAA 1936 Pt III Div 3 Subdiv H ITAA 1936 82KZL ITAA 1936 82KZL(1) ITAA 1936 82KZM ITAA 1936 82KZMA ITAA 1936 82KZMB ITAA 1936 82KZMC ITAA 1936 82KZMD ITAA 1936 82KZME ITAA 1936 82KZME(1) ITAA 1936 82KZME(2) ITAA 1936 82KZME(3) ITAA 1936 82KZME(7) ITAA 1936 82KZMF ITAA 1936 82KZMF(1) ITAA 1936 Pt III Div 6 ITAA 1936 Pt IVA ITAA 1936 177A ITAA 1936 177C ITAA 1936 177D ITAA 1936 177D(b) ITAA 1997 6-5 ITAA 1997 8-1 ITAA 1997 17-5 ITAA 1997 Div 27 ITAA 1997 Div 35 ITAA 1997 35-10 ITAA 1997 35-10(2) ITAA 1997 35-55 ITAA 1997 35-55(1)(b) ITAA 1997 Div 40 ITAA 1997 Subdiv 40-F ITAA 1997 40-515 ITAA 1997 40-515(1)(a) ITAA 1997 40-515(1)(b) ITAA 1997 40-520(1) ITAA 1997 40-520(2) ITAA 1997 40-525(2) ITAA 1997 40-525(3) ITAA 1997 40-530 ITAA 1997 40-535 ITAA 1997 40-540 ITAA 1997 40-545 ITAA 1997 40-550 ITAA 1997 Subdiv 61-J ITAA 1997 108-5 ITAA 1997 110-25(2) ITAA 1997 Div 328 ITAA 1997 328-105 ITAA 1997 328-180 ITAA 1997 Subdiv 328-F ITAA 1997 Subdiv 328-G TAA 1953 Pt IVAAA Copyright Act 1968 Corporations Act 2001
Case references: Commissioner of Taxation v. Lau (1984) 6 FCR 202 84 ATC 4929 (1984) 16 ATR 55
Subject references: borrowing expenses carrying on a business commencement of business fee expenses interest expenses management fees non-commercial losses producing assessable income product rulings public rulings tax avoidance taxation administration