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The agribusiness asset class is divided into two broad categories: forestry and non-forestry.
Forestry MIS
Forestry managed investment schemes have the purpose of establishing and tending trees for felling in Australia. An investment in forestry involves financing the initial cost of planting trees with a relatively low amount applied for ongoing maintenance. These schemes are typically longer in duration than non-forestry investments as it usually takes longer to reach maturity. Further, it is generally at the point of harvest that there is any material quantifiable return on the project.
Non-Forestry MIS
Non-forestry managed investment schemes include horticultural investments such as nuts, olives, citrus fruits, stone fruits, applies, truffles and wine schemes as well as other agriculture schemes such as breeding animals, abalone and south sea pearls. Non-forestry investments generally require more ongoing maintenance costs than forestry schemes in addition to the initial plantation costs. By contrast, growers will receive income before the crops are fully ready for harvest.
“Tax Effective” Agribusiness
Agribusiness investments are often known as ‘tax effective’ investments because it offers investors a full tax deduction for the year in which the investment is made. The ATO considers the investors to be primary producers, carrying on an agricultural, forestry or horticultural business to produce income which will then be assessable.
For an investor in the top marginal income tax rate (46.5%), an investment of $11,000 (incl GST) will generate a tax refund of $4,650 plus a credit for the GST.
Because of the “up-front” tax deductibility of tax-effective investments, the higher the taxpayer’s marginal tax rate, the lower the after tax entry cost. This is why these investments are most attractive to those higher income earners on the highest marginal tax rate. Tax-effective agribusiness investments allow these investors to reduce their tax liability. The tax treatment of a tax-effective investment enhances the overall benefits of the underlying investment. An important distinction about MIS investments is that it only defers but not avoids your tax liability. Deferral of tax is legitimate, effective tax planning, but only because the agribusiness MIS project ultimately gives rise to a stream of assessable income from the sale of the produce, which is taxed at your marginal tax rate. Another factor to consider when deciding to invest in agribusiness investments is the potential return earned on the money that is refunded by the tax office that can be invested anywhere.
An agribusiness managed investment schemes should be supported by Australian Taxation Office (ATO) product rulings which specifies that the tax deduction is available to the investor who is taking part in an ‘agricultural business’. A tax ruling provides investors with the assurance of a tax outcome, so long as the Responsible Entity abides by the project arrangement for which it was granted the product ruling. It is important to note that an ATO Product Ruling is not an endorsement or recommendation for the merits of the project but rather an assurance of its tax position. ATO rulings for agribusiness MIS are also complemented with checks by the Australia Securities & Investments Commission (ASIC) and many projects have independent research. Investors are encouraged to seek and read research reports conducted for the project to gain an independent review of an agribusiness MIS. |
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| Agribusiness Commission Rebates | Cash rebates of up to 8.0% on agribusiness projects in Australia. more info
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| Entry Fees | Entry fees are optional. Are you paying entry fees on existing managed funds? more info
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