Ongoing Timbercorp payments: Tax deductible?
Investors in Timbercorp or Great Southern managed investment schemes (MIS) may be wondering whether their ongoing payments remain tax deductible. Given the collapse of both companies, this is an important question with significant tax implications.
What Happened to Timbercorp and Great Southern?
Timbercorp was placed into voluntary administration and is now in liquidation.
Great Southern followed a similar path, entering voluntary administration, with receivers and managers appointed over several subsidiaries.
The collapse of these schemes was largely due to insufficient funds to maintain the forestry and horticultural projects they had underway. This has left investors in a state of uncertainty about:
Whether crops will ever be harvested
If another company will step in to take over the projects
Whether the assets of the schemes will be sold
Are Ongoing Payments Still Tax Deductible?
According to general guidance provided by the ATO, if you continue to make payments under the original MIS agreements, these expenses should remain tax deductible, as long as the scheme is still operating in a form consistent with the original product ruling.
Key points include:
Previously made payments are deductible under the product ruling.
Future payments should also remain deductible if they align with the original terms of the scheme.
If the scheme is wound up, or there are substantial and material changes to how the scheme operates, the original product ruling will no longer apply. In this case, deductibility must be determined under general tax law principles.
Changes in administration, such as replacing the responsible entity (RE) or appointing a new administrator, do not constitute a material change. Therefore, the product ruling remains in effect.
The ATO is currently preparing a draft tax ruling for public consultation. This may provide further clarity for investors once released.
Disclaimer: The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. All content relates to the current financial year only. Future changes to tax laws, thresholds or administrative requirements may affect the accuracy or relevance of this information, so you should always confirm that the guidance remains current. While every effort has been made to ensure accuracy at the time of publication, Dolman Bateman accepts no responsibility or liability for any loss or damage arising from reliance on this information. You should seek professional advice tailored to your circumstances before making any financial or tax decision.
