Federal Budget 2006
Proposed Taxation Arrangements For Plantation Forestry
In the 2005-06 Budget, the Government
announced that it would be extending the operation of the 12
month prepayment rule for forestry MIS until 30 June 2008
and that it would undertake a review of the taxation
treatment of plantation forestry.
The Government has now considered the findings of the
review. In consideration of the Government's support for the
plantation forestry industry, the Government is disposed to
the following arrangements which will form the basis for
consultation. The arrangements are designed to remove the
uncertainty surrounding whether MIS investments are
deductible under the current law in respect of the
requirement that investors be carrying on a business. In
addition they will reduce the administrative and compliance
burden on investors and MIS companies.
The proposed forestry taxation arrangements are as follows:the 12 month prepayment rule for forestry MIS investors and
its associated requirement that investors be carrying on a
business would be replaced with new rules in the income tax
law governing the deductibility of investments in MIS;forestry MIS investors would be able to deduct the full cost
of their investment, subject to a cap of $6,500 per hectare
in the year of expenditure with the balance (if any) of the
investor's contribution deductible in the following year;the period within which planting must occur as a condition
of deductibility would be extended from 12 months to 18
months;trading in forestry MIS investments acquired after 30 June
2008 would be allowed such that:
- interests are required to be held by initial investors for a period of
four years from the date of entering the arrangement for
deductions to be maintained;
- all returns to an investor treated as assessable income; and
- the cost of acquiring a MIS interest on the secondary market to be
deductible against income received at disposal or harvest.deductibility would also be conditional on the certification
of the MIS company to ensure best practice in forestry,
regional planning, land use and natural resource management,
under arrangements to be developed by the Department of
Agriculture, Fisheries and Forestry;in recognition that there are higher costs associated with
boutique forestry schemes, such as sandalwood, an
appropriate treatment for such schemes is to be considered
in consultation; andthe administration of the goods and services tax (GST) for
MIS arrangements would be simplified, by ensuring that
individual investors in a MIS are treated as passive
investors for GST purposes (thereby removing them from the
GST system), subject to the agreement of the States and
Territories.
The proposed taxation arrangements for forestry MIS
investors would be fully reviewed in 2011 to examine the
appropriateness of the arrangements in the context of the
Government's forestry and broader policy objectives.
09/05/2006 source: www.peterdutton.com.au |
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