MIS investors' tax concerns relieved

The uncertainty surrounding the tax deductions given to investors in forestry managed investment schemes (MIS) run by Timbercorp and Great Southern has ended, with the Government announcing plans to amend tax law in investors’ favour.

The holding rule currently in place requires investors in forestry MIS to maintain their interests for four years as a condition of the up-front tax deduction. There had been some concern that investors in Great Southern and Timbercorp’s forestry schemes would have previous years’ deductions clawed back as a result of failing to meet the rule, with both managers collapsing under debt pressures earlier this year.

Announcing the plan, Assistant Treasurer, Senator Nick Sherry, said the government would amend the tax law for forestry MIS to “allow an investor’s deduction to stand where the four-year holding rule is failed due to events beyond the control of the investor”.

“These events include insolvency of the MIS manager, the death of the investor or where an MIS interest is cancelled, for example because of trees being destroyed by fire, flood or drought,” Sherry said.

Sherry said civil penalties will still apply to the promoters of forestry MIS, “notwithstanding that the investors' deductions are allowed to stand because of the amendment to the four-year holding rules”.

“The amendments will ensure the right balance between protecting certain investors' deductions and discouraging excessively risky behaviour,” Sherry said.

The holding period, and thus the exemption, applies only to forestry MIS. The government will release draft legislation for public comment.