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Change To Australian Forestry Managed Investment Scheme Tax Rules

by Mary Swire,, Hong Kong

23 December 2009

Australia’s Assistant Treasurer, Nick Sherry, has released for public consultation draft legislation to change a key tax rule for forestry managed investment schemes (MISs) that will protect investors in recently collapsed schemes.

The four-year holding rules were introduced in 2007 as part of a package to regulate secondary trading of forestry interests. The government had previously announced that it was aware that the collapse, earlier this year, of MISs managed by Timbercorp and Great Southern was expected to lead to a number of forestry MISs being wound up or restructured.

That could cause investors to fail the current requirement of having held their interest in the MISs for four years as a condition of an up-front tax deduction. "With this measure, the government is protecting around 19,000 investors in collapsed forestry managed investment schemes from an unintended adverse tax outcome," Sherry said.

The draft legislation amends the four-year rule to allow an investor's deduction to stand if a capital gains tax (CGT) event happens because of circumstances outside the initial investor's control, and the initial investor could not have reasonably foreseen this CGT event happening, at the time they acquired the forestry interest.

The rule applies to CGT events from July 1, 2007, and the amendments in the draft legislation would take effect from that date.

The draft legislation also amends the promoter penalty provisions to ensure the law continues to deter forestry MISs covered by Australian Taxation Office product rulings from being implemented in a way that is materially different from that described in the product ruling.

A comprehensive report in our Intelligence Report series examining tax-sheltering arrangements for investors, including Venture Capital, Forest Finance and Film Finance in a number of key jurisdictions, is available in the Lowtax Library at and a description of the report can be seen at

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