PJC Report - Agribusiness
On 8th September 2009, the Parliamentary Joint Committee on Corporations and Financial Services (PJC) tabled its report on the inquiry into aspects of the agribusiness Managed Investment Schemes (MIS). These schemes have been in the news a lot recently with the collapse of Timbercorp and Great Southern.
MIS fall into two main categories, forestry (eucalypts and other species for woodchips, hardwoods like mahogany and teak), and non forestry (such as olives, various nuts and fruits).
Last year, the government legislated to ensure that those investing in regulated MIS forestry schemes were entitled to a tax deduction for their investment. Non forestry was not part of this legislation and the ATO decided that the non forestry was not entitled to a tax deduction. This was challenged by the MIS industry who mounted a test case against the ATO, which was decided against the ATO and in favour of the schemes. This did not please the farming lobby which has been lobbying for a denial of tax deductions to investors.
The PJC just tabled report made just 3 recommendations. They were:
Recommendation 1 –
That the government considers investigating and modelling the effects of amending the ITAA 1997 to ensure that tax deductions for non-forestry agribusiness MIS investment under the general business deduction provisions of the ITAA 1997 only be permitted to be offset against future taxable income from the same MIS.
Recommendation 2 –
That the government amend the Corporations Act to require ASIC to appoint a temporary Responsible Entity when a registered managed investment scheme becomes externally administered or a liquidator is appointed.
Recommendation 3 –
That ASIC require agribusiness MIS to disclose the qualifications and accreditation of third parties that provide expert opinion on likely scheme performance.
Recommendations 2 & 3 make a lot of sense ands should be enacted without delay.
If Recommendation 1 is enacted it will stop investors claiming upfront tax deductions and effectively kill the non forestry investment sector. Whilst the farmers may be happy, the investment in this sector has allowed development of new varieties of fruits, the growing of varieties not normally grown here and the scale which lowers our dependence on imported fruits.
If this is legislated, you have to ask who will provide that innovation. Farming of this sort is a long term investment which requires significant capital investment that just can’t be provided by the family based farmer. If an investor is willing to provide that and is prepared to wait many years to get their return they should be entitled to tax relief for it.
Without tax concessions there will be no money and without money there will be no innovation.
POSTED: 11-Sep-2009