Item 10 - Forestry managed investment scheme income (trust)

If the trust is an initial participant, it cannot claim a deduction if it has disposed of its forestry interest in an FMIS within four years after the end of the income year in which it first made a payment. However, the deduction will be allowed if the disposal occurs because of circumstances outside of the trust's control, provided the trustee could not have reasonably foreseen the disposal happening when the interest was acquired.

Disposals that would be outside your control include compulsory acquisition, insolvency of the trust the scheme manager, or cancellation of the interest due to fire, flood or drought. Refer to Forestry Managed Investment Schemes - minor amendments to holding period rules.

1. If the Trust received thinning proceeds from its forestry interest, include the actual amount received at this label.
2. Sale and harvest receipts - forestry interest no longer held. If the Trust ceased holding its forestry interest because of a CGT event (because it sold its interest or it received harvest proceeds), include the market value of the forestry interest at the time of the CGT event at this label.
3. Sale and harvest receipts - forestry interest still held. If a CGT event happened and the Trust still held its forestry interest (because it sold part of its interest or there was a partial harvest), include the amount by which the market value of the forestry interest was reduced at this label.

1. Thinning receipts. If the Trust received thinning proceeds from its forestry interest, include the actual amount received at this label.
2. Sale and harvest receipts - forestry interest is no longer held. If the Trust ceased holdings its forestry interest as a result of a CGT event (because it sold its interest or it received harvest proceeds), include at this label the lesser of the following two amounts:
   1. the market value of the forestry interest (at the time of the CGT event), or
   2. the amount (if any) by which the total forestry scheme deductions exceeded the incidental forestry scheme receipts.
3. Sale and harvest receipts - forestry interest still held. If a CGT event happened and the Trust still held its forestry interest (because it sold part of its interest or there was a partial harvest), work out the following amounts:
   1. the market value of the forestry interest (at the time of the CGT event), or
   2. the amount (if any) by which the total forestry scheme deductions exceeded the incidental forestry scheme receipts.

   Lesser of two amounts above   X	The decrease (if any) in the market value of the forestry interest (because of the CGT value)
   	The market value of the forestry interest just before the CGT event

The Trust is a subsequent participant in an FMIS. You sell your forestry interest at the market value of $20,000. The sale of the forestry interest is a CGT event. Your original cost base is $14,000.

In the time that you have held the forestry interest you have claimed $4,000 in deductions (your ‘total forestry scheme deductions’) for lease fees, annual management fees and the cost of felling that you have paid to the forestry manager. In an earlier period, you have received $1,500 from thinning proceeds (your ‘incidental forest scheme receipts’).

You will need to include $2,500 (that is $4,000 less $1,500) at this label because this amount is less than the market value of your forestry interest at the time of the CGT event

Sale and harvest receipts - forestry interest still held after the CGT event

If you still held your forestry interest after the CGT event, for example, if you received harvest proceeds over two or more income years, apportion your income as follows:

Step 1: Calculate the lesser of the following:

• The market value of the forestry interest (at the time of the CGT event); or

• The amount (if any) by which the total forestry scheme deductions exceeded the incidental forestry scheme receipts.

Step 2: Use the amount from step 1 in the following formula:

Amount worked out at step 1 X the decrease (if any) in the market value of the forestry interest (because of the CGT event) / the market value of the forestry interest just before the CGT event.

Step 3: Include the amount from step 2 at label Q item 10

Step 4: Cost base calculation

For CGT purposes, to calculate the new cost base or reduced cost base of the trust’s forestry interest:

• Apportion the original cost base and reduced cost base of the Trust’s forestry interest by the change in market value of the Trust’s forestry interest, and then

• Add the amount from step 3.

This apportioned cost base or reduced cost base should then be used to calculate your capital gain or capital loss.

The Trust is a subsequent participant in an FMIS. You receive harvest proceeds over two income years. You receive your first harvest payment of $5,000 in the 2017-18 year of income.

The market value of your forestry interest is $20,000 just before you receive your first harvest payment (which is a CGT event). After you receive this first harvest payment, the market value of your forestry interest is reduced to $15,000. Your original cost base is $14,000.

In the time that you have held your interest, you have claimed $4,000 in deductions (your ‘total forestry scheme deductions’) for lease fees, annual management fees and the cost of felling that you have paid to the forestry manager. In the same period, you have received $1,500 from thinning proceeds (your ‘incidental forest scheme receipts’).

Step 1: The market value of the forestry interest (at the time of the CGT event) is $20,000

The amount by which the total forestry scheme deductions exceed the incidental forestry scheme receipts is $2,500 (that is $4,000 - $1,500)

The amount to use in step 2 is $2,500

Step 2: $2,500 X ($5,000 / $20,000) = $625

Step 3: You will include the amount at Step 2 at label Q item 10.

Step 4: In the 2017-18 income year, the Trust received $15,000 in payment for the final harvest (which is a CGT event). It has not paid any other fees in the 2017-18 income year.

The Trust will need to include the remainder from Step 2 of $1,875 (that is 2,500 - $625) at label Q item 10 in its 2017-18 income tax return.