Preamble
The short answer is that the disposal occurs when the right is granted.
An agreement by which a person sells timber, or grants to another a right to cut and remove timber from the grantor's land, may amount to either: (a) a sale of goods (timber); or (b) a creation of an interest in land (e.g., a profit a prendre or an interest in the nature of a profit a prendre ): Marshall v. Green (1875) 1 CPD 35; Ashgrove Pty Ltd & Ors v. FC of T 94 ATC 4549; (1994) 28 ATR 512; Australian Softwood Forests Pty Ltd v. Attorney-General (NSW); Ex rel Corporate Affairs Commission (1980-1981) 148 CLR 121.
The category into which any particular agreement falls depends on the intention of the parties determined from the terms of the agreement and the relevant circumstances.
If the agreement is a sale of goods (timber), the seller disposes of the timber for the purposes of Part IIIA of the Income Tax Assessment Act 1936 when the contract is made (subsection 160U(3)), not when the trees are felled. The disposal of the timber is, in terms of section 160R, a disposal of part of an asset, namely, the realty in which the growing trees are rooted: Ashgrove case 94 ATC at 4562; (1994) 28 ATR at 530.
If the agreement results in the creation of an interest in land (e.g., a profit a prendre ), there is a disposal under former subsection 160M(6) for all interests created before 26 June 1992: Ashgrove case 94 ATC at 4562; (1994) 28 ATR at 531. This disposal by the grantor occurs when the contract is made, granting the right to cut and remove the timber and operating to create the interest in land (subsection 160U(3)).
If the agreement results in the creation of an interest in land after 25 June 1992, there is a disposal by the grantor under subsection 160M(6A). This also occurs when the contract is made (subparagraph 160U(6)(a)(iii)).
In either situation where an interest is created, there is no further disposal by the grantor of any asset for the purposes of Part IIIA when the trees are felled. For Part IIIA purposes there is no disposal of timber nor any part disposal of the land. The operation of felling and removing the trees is a necessary consequence, and part and parcel, of the interest created in the land.