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INCOME TAX ASSESSMENT ACT 1997 - SECT 40.1005

Deduction for expenditure for establishing trees in carbon sink forests

             (1)  You can deduct an amount for an income year if:

                     (a)  you or another entity incurred capital expenditure that is covered under section 40-1010 in relation to particular trees; and

                     (b)  you satisfy a condition in subsection (5) for the trees for at least part of the income year; and

                     (c)  you are carrying on a * business in the income year; and

                     (d)  you use the land occupied by the trees for the primary and principal purpose of * carbon sequestration by the trees (see section 40-1015); and

                     (e)  your purposes in using the land occupied by the trees do not include any of the following:

                              (i)  felling the trees;

                             (ii)  using the trees for * commercial horticulture; and

                      (f)  you do not use the land in connection with:

                              (i)  a * managed investment scheme; or

                             (ii)  a * forestry managed investment scheme.

             (2)  The amount of the deduction is worked out under this formula:

where:

"establishment expenditure" is the amount of expenditure mentioned in subsection (1).

"write-off days in income year" is the number of days in the income year:

                     (a)  that occur within the period:

                              (i)  starting on the first day of the income year in which the trees are established; and

                             (ii)  ending 14 years and 105 days after that day; and

                     (b)  on which you use the land occupied by the trees for the primary and principal purpose of * carbon sequestration by the trees; and

                     (c)  on which you satisfy a condition in subsection (5) for the trees.

"write-off rate" is 7%.

             (3)  You cannot deduct more in total than the amount of capital expenditure incurred for establishing the trees up to the time at which they are established.

             (5)  The conditions are as follows:

 

Conditions for deduction for establishing trees in carbon sink forest

Item

Condition

1

You own the trees and any holder of a lease, lesser interest or licence relating to the land occupied by the trees does not use the land for the primary and principal purpose of * carbon sequestration by the trees.

2

The trees occupy land you hold under a lease, or a * quasi-ownership right granted by an * exempt Australian government agency or an * exempt foreign government agency, and:

(a) the lease or quasi-ownership right enables you to use the land for the primary and principal purpose of * carbon sequestration by the trees; and

(b) any holder of a lesser interest or licence relating to the land does not use the land for the primary and principal purpose of carbon sequestration by the trees.

3

You:

(a) hold a licence relating to the land occupied by the trees; and

(b) use the land for the primary and principal purpose of * carbon sequestration by the trees, as a result of holding the licence.



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