Agri-Business Tax Ruling Overturned
During 2006, the Australian Taxation Office (ATO) began to make noises about whether investment in Agri-bususines (forestry plantations and food crops) was in fact tax deductible (as was the tax position at that time). During 2007, the ATO produced a tax ruling giving the new ATO position that investment was of a capital nature and therefore not tax deductible. This was a total reversal of its previous position.
This ruling applied to all future investments only and had no impact on investments already in place, which would be guaranteed to have the previously existing position continue.
The government, wishing to continue to foster plantation timber production responded to the new ATO position by legislating to allow the deductibility of Forestry investments, but did not address those invested into non-forestry agricultural endeavours such as growing fruits and other crops.
The Agricultural Managed Investment Scheme (MIS) industry, believing the ATO ruling was contrary to law, launched a test case against the ATO.
This has now been decided by the full court which has unanimously agreed with the MIS proposition and reinstated the previous position where rent and fees paid were deductible to the investor. The Commissioner for Taxation has indicated he will not appeal the decision.
This is not only a proper and just decision as the ruling by the ATO defied logic, but a win for common sense. Much of the innovation in production methods and improvement in product (including new varieties and improved growth rates) has come from the involvement of the MIS industry which would have been lost to Australia has the ATO decision stood.
POSTED: 24-Dec-2008