The Australian Securities and Investments Commission (ASIC) has varied its standard licence conditions relating to the land on which primary production occurs in the operation of managed investment schemes

The changes have been introduced to protect the interests of scheme members in the land underlying the scheme, by accommodating recent changes to the taxation treatment of investments in primary production schemes.

Under State or Territory land titles law, licensees operating a timber plantation scheme must register an interest conferring the right to use the land on the scheme member.

The variations introduced by ASIC maintain this registration requirement, however, the new conditions allow licensees of timber plantation managed investment schemes up to 9 months from the issue of schemes to effect registration, subject to the licensee satisfying certain criteria. Previously, licensees were required to register before or immediately after the issue of interests in the scheme.

The variations were effected following consultation with affected licensees, the Australian Taxation Office, and the Treasury regarding the introduction, last year, of the 12-month prepayment rule (inserted into the Income Tax Assessment Act 1936 (Cth) section 82KZMG by the Taxation Laws Amendment Act (No.1) 2002 (Cth)).

The 12-month prepayment rule means that investors in timber plantation managed investment schemes may, in certain circumstances, obtain a tax deduction for expenses paid in one tax year in relation to ‘seasonally dependent agronomic activities’ to be carried out in a subsequent tax year or years.

In order to comply with ASIC’s previous licence conditions, some investors may, in some cases, have been prevented from benefiting from the 12-month prepayment rule.

In varying its licence conditions, ASIC has sought to achieve an appropriate balance between the facilitation of business and consumer protection, by considering the consequences for the commercial operations of timber plantation managed investment schemes, while acting to avoid altering the taxation status of such schemes.

ASIC's variation of the standard licence conditions constitutes ASIC's interim policy position pending any reform which might result from the review of the Managed Investments Act.

The relevant licence conditions for securities dealers who are yet to transition to the new licensing regime introduced by the Financial Services Reform Act (FSRA) are available at PF189: Responsible entity authorisation and licence conditions; conditions 17, 18, and 19.

For holders of an Australian Financial Services licence, the conditions are at Pro Forma 209: Australian Financial Services Licence conditions; conditions 43, 44, and 45.

You can obtain a copy of the Pro Formas by calling our Infoline on 1300 300 630. Pro Forma 209 is also available on our website asic.gov.au/fs.

End of release

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Pro Forma 189: Responsible entity authorisation and licence conditions

Pro Forma 209: Australian Financial Services Licence conditions