Income tax: GlenKara Estate Vineyard Project - Stage 2A

This Product Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) identified in the Ruling section (below) apply to the defined class of entities, who take part in the scheme to which this Ruling relates. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 (ITAA 1997). In this Product Ruling this scheme is referred to as the GlenKara Estate Vineyard Project - Stage 2A or simply as 'the Project'.

This part of the Product Ruling specifies which entities can rely on the tax benefits set out in the Ruling section of this Product Ruling and which entities cannot rely on those tax benefits.

The class of entities who can rely on those tax benefits are referred to as Growers. Growers will be those entities who were specifically identified in paragraph 40 of Product Ruling PR 1999/84 and who, on or after 23 June 1999 and on or before 30 June 1999, entered into the specified scheme that is set out in paragraphs 12 to 38 of that Ruling. They must have had a purpose of staying in the scheme until its completion (that is, being a party to the relevant agreements until their term expired), and deriving assessable income from this involvement.

The class of entities who can rely on the tax benefits set out in the Ruling section of this Product Ruling does not include entities who: • were accepted into this Project before 23 June 1999 or after 30 June 1999; or • participated in the scheme through offers made other than through the Prospectus.

The class of entities defined in this Product Ruling may rely on its contents provided the scheme that was actually carried out has been carried out in accordance with the scheme described in paragraphs 12 to 38 of PR 1999/84.

If the scheme actually carried out differs materially from the scheme that was described in PR 1999/84 and in this Product Ruling, then: • this Product Ruling has no binding effect on the Commissioner because the scheme entered into is not the scheme on which the Commissioner has ruled; and • this Product Ruling may be withdrawn or modified.

This work is copyright. Apart from any use as permitted under the Copyright Act 1968 , no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to: Commonwealth Copyright Administration Attorney General's Department Robert Garran Offices National Circuit Barton ACT 2600 or posted at: http://www.ag.gov.au/cca

This Product Ruling applies for the income years ending 30 June 2004 to 30 June 2008 to the specified class of entities that entered into the scheme from 23 June 1999 until 30 June 1999, being the closing date for entry into the scheme. This Product Ruling provides advice on the availability of tax benefits to the specified class of entities for the 2004, 2005, 2006, 2007 and 2008 income years.

However the Product Ruling only applies to the extent that: • up to 30 June 2008 there was no change in the scheme or in the entity's involvement in the scheme; • the Ruling is not later withdrawn by notice in the Gazette ; or • the relevant provisions are not amended.

If this Product Ruling is inconsistent with a later public or private ruling, the relevant class of entities may rely on either ruling which applies to them (item 1 of subsection 357-75(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA)).

If this Product Ruling is inconsistent with an earlier private ruling, the private ruling is taken not to have been made if, when the Product Ruling is made, the following two conditions are met: • the income year or other period to which the rulings relate has not begun; and • the scheme to which the rulings relate has not begun to be carried out.

If the above two conditions do not apply, the relevant class of entities may rely on either ruling which applies to them (item 3 of subsection 357-75(1) of Schedule 1 to the TAA).

This Product Ruling applies to those entities that are within the class of entities described in paragraphs 3 and 4 of this Ruling and who incurred the fees set out in the Development Agreement, Management Agreement and the Vineyard Lease.

Growers who were accepted into the Project between 23 June 1999 and 30 June 1999 have losses arising from their participation in the Project. These losses are subject to the loss deferral rule in section 35-10 unless a Grower satisfies a test, the Grower is eligible for an exception or the Commissioner exercises the discretion set out in section 35-55.

Having regard to the information provided with the application for this Product Ruling and an inspection of the Project carried out by the Tax Office on 25 July 2008 the Commissioner is satisfied that the business activity of each of those Growers was affected by special circumstances outside of their control. Therefore, for the income years ended 30 June 2006, 30 June 2007 and 30 June 2008, the Commissioner will exercise the discretion in paragraph 35-55(1)(a). The exercise of this discretion will allow losses from those income years to be offset against each of the Growers' other assessable income in the income year in which the losses arise.

The Commissioner has not exercised the discretion for losses arising from a Grower's business activity in the income years ended 30 June 2004 and 30 June 2005 as the business activity would not have satisfied one of the four tests in Division 35 even if the special circumstances had not occurred. Losses arising in the income years ended 30 June 2004 and 30 June 2005 will be able to be offset against assessable income in the income year ended 30 June 2006.

The scheme that is the subject of this Ruling is identified and described in paragraphs 12 to 38 of PR 1999/84. It also incorporates the following additional documents and facts: • Application for a Product Ruling received on 24 April 2008 as constituted by documents provided on 17 September 2007, 12 and 15 October 2007, 8 and 16 November 2007 and additional correspondence and emails dated, 19 December 2007, 3, 7 and 14 January 2008, 26 February 2008, 26 and 31 March 2008, 22 April 2008, 25 June 2008, 4, 14 and 18 July 2008; and • Report of site inspection of the Project undertaken on 25 July 2008.

On 23 June 2008 a general meeting of the Growers of the Project passed a resolution as an extraordinary resolution for the Responsible Entity of the Project, Pyrenees Vineyard Management Limited, to wind up the Project.

In deciding to exercise the discretion in paragraph 35-55(1)(a) for the income years ended 30 June 2006, 30 June 2007 and 30 June 2008, the Commissioner has applied the principles set out in Taxation Ruling TR 2007/6 Income tax: non-commercial business losses: Commissioner's discretion. Based on evidence supplied by the Responsible Entity Pyrenees Management Limited and the Project site inspection, the Commissioner has determined that the business activities of Growers in the Project were affected by drought conditions outside of their control. Drought conditions are special circumstances for the purposes of paragraph 35-55(1)(a).

The Commissioner is satisfied that if it were not for the special circumstances the business activity carried on by a Grower would have satisfied the profits test in section 35-35 for the income years ended 30 June 2006 to 30 June 2008. The Commissioner has therefore exercised the discretion in paragraph 35-55(1)(a) for those income years.

The loss deferral rule in section 35-10 applies to losses arising from a Grower's business activity for the income years ended 30 June 2004 and 30 June 2005 as neither the profits test, nor any of the other tests in Division 35, would have been satisfied in those income years even if the special circumstances had not occurred. Losses arising in the income years ended 30 June 2004 and 30 June 2005 will be able to be offset against assessable income in the income year ended 30 June 2006.

The following is a detailed contents list for this Ruling: Paragraph What this Ruling is about 1 Class of entities 2 Qualifications 5 Date of effect 8 Ruling 13 Application of this Ruling 13 Division 35 - Deferral of losses from non commercial business activities 14 Section 35-55 exercise of the Commissioner's discretion 14 Scheme 17 Appendix 1 - Explanation 19 Appendix 2 - Detailed contents list 22