Agribusiness is now a common managed investment option for investors with a focus on a number of key Australian agricultural commodities such as forestry and horticulture. A key feature of agribusiness investment is the tax effectiveness, providing substantial tax deductions where supported by an Australian Taxation Office Product Ruling.

Agribusiness investments fall into two broad categories: forestry and non-forestry. Forestry managed investment schemes have the purpose of establishing and tending trees for felling in Australia. 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.

Tax effectiveness
When you become an investor in agribusiness, the ATO considers you to be a primary producer, carrying on a business in agriculture, forestry or horticulture for the purposes of generating income. Therefore the ATO applies the same tax treatment to agribusiness managed investment scheme (MIS) investors as they do to farmers. Subject to an ATO Product Ruling, investments are tax deductible in the year in which they are made because the expenses are incurred before the income is received.

Diversification
Agribusiness is an alternative asset class that offers returns generated from a traditional income source. Agribusiness offers investors another level of diversification because it is not correlated with interest rates, sharemarkets, bonds or property markets.

How it works
Tax effective agribusiness projects are usually accessed via managed investment schemes. The investor becomes the grower and leases a unit of land to the purpose of growing forestry or non-forestry assets. A 'Scheme Manager' will generally be responsible for the maintenance, harvesting, marketing and sales for the product. Similar to other forms of managed investments, agribusiness projects will have a Responsible Entity and scheme Constitution. As the grower you own the produce created by your primary production activities and as a result are entitled to the sale proceeds of the harvest, less the costs to the Scheme Manager and Responsible Entity as set out in the project terms.