Income tax: is a deduction under section 8-1 of the Income Tax Assessment Act 1997 allowable for underwriting fees paid as part of a harvest payment agreement with either AWB (International) Limited or AWB (Australia) Limited or a payment agreement with ABB Grain Export Limited?

Yes.

When a grower enters into a harvest payment agreement or payment agreement, the grower can elect to receive harvest advance drawing amounts or drawing amounts as a loan prior to receiving any distributions from a pool and have future pool distributions applied against the outstanding loan balance. However, pool distributions may not entirely repay amounts owing in respect of a grower's harvest advance drawing amounts or drawing amounts. For the payment of a commercial underwriting fee, AWB Finance Limited, AWB (Australia) Limited ('AWBA') or ABB Grain Limited accepts this risk and undertakes that it will not recover from the grower the difference between the drawing amount and the pool distributions. A grower who has underwriting protection and who is discharged from any obligation to pay any amounts owing includes in assessable income the difference between the drawing amounts and the pool distributions (Taxation Rulings TR 2001/1 and TR 2001/5).

The payment of the underwriting fee by the grower as part of a harvest payment agreement or payment agreement is an integral part of the pooling arrangements for the sale of wheat or barley to AWB (International) Limited, AWBA or ABB Grain Export Limited. The underwriting fee is calculated at a rate per tonne delivered.

In these circumstances there is sufficient nexus between the underwriting fee and the derivation of assessable income for the purposes of section 8-1 of the Income Tax Assessment Act 1997.