If I continue to make payments under the agreements, will these expenses be tax deductible?
Taxpayers who invested in either a Timbercorp or Great Southern managed investment scheme are now well aware of the fact that:
- Timbercorp was originally placed into voluntary administration and is now in liquidation; and
- Great Southern was also placed into voluntary administration with several of its subsidiaries also having ‘receivers and managers’ appointed.
The main reason for the above consequences was that the entities had simply run out of funds and were no longer able to maintain the forestry and horticultural projects they had underway. This immediately creates massive uncertainty to investors’ future investment as there is no guarantee of whether:
- the crops will ever be harvested [meaning there will be no harvest proceeds]
- a new entity will be found to take over the projects; or
- the assets of the entities [i.e. land, trees and machinery] will be sold [and for what price]
The ATO are in the process of preparing a draft ruling for consultation, however the follow general guidance is provided in the interim.
According to the arrangement set out in the product ruling, the payments that you have already made are deductible and any future expenses incurred should continue to deductible.
If the scheme is wound-up or the implementation of the scheme substantially altered in a material way, then the product ruling will no longer apply and deductibility is determined under the ordinary tax laws.
Where there is a change in the appointment of an administrator or even the replacing a RE [Responsible Entity], these do not represent material changes to the scheme described in a product ruling, so the product ruling still applies.
This article has been prepared for the purposes of general information and guidance only. It should not be used for specific advice or used for formulating decisions under any circumstances. If you would like specific advice about your own personal circumstances please contact our office.