Gov’t ruling on non-forestry schemes surprises industry
The Federal Government will stop tax breaks on non-forestry managed investment schemes from July 1 this year.
The Government has been reviewing the managed investment scheme (MIS) sector since before Christmas and last December announced tax breaks for forestry schemes would continue.
The announcement late last night on stopping the breaks on other schemes has caught the industry by surprise.
Assistant Treasurer Peter Dutton said the Government, MIS agribusiness sector and the Australian Taxation Office (ATO) have been in discussions over the future of non-forestry tax breaks.
“The Government has decided it is not disposed to introduce a similar taxation arrangement for investments in non-forestry agribusiness MIS,” he said.
“The ATO has indicated that developments in this area of the law have required the ATO to reconsider its interpretations of the current taxation laws as it applies to both forestry and non-forestry investments.”
Forestry MIS schemes will be able to deliver an upfront tax deduction for investors if 70 per cent of the money raised is used for developing forestry plantations.
“This decision will ensure the continued expansion of our plantation forestry estates and lends support to the industry’s 2020 vision,” Dutton said.
“The effect of the likely change in interpretation by the ATO will be to place investments in non-forestry agribusiness MIS on the same footing as other ‘passive’ investments in agriculture.”
According to research house Adviser edge, there are 67 agribusiness MIS schemes being offered this year, of which 29 are forestry projects.
Horticultural schemes, which include nuts, olives, citrus fruit and truffles, total 22 this year and there are eight wine schemes.
It is too early to say if any of these schemes will now cease due to the change in the taxation status as many new players try to build funds under management over a number of years.
The uncertainty for these non-forestry schemes is heightened by the ATO’s announcement it will not issue any more product rulings for non-forestry schemes after July 1.
Schemes without a product ruling have almost no hope of raising money after that date.
Recommended for you
Sequoia Financial Group has announced it is selling off its Informed Investor subsidiary which it acquired in April 2022.
Wealth Data has examined which advice business model has seen the most growth since the start of the year including those that offer holistic advice.
Research conducted by Elixir Consulting and Lonsec has quantified the efficiency gains of using managed accounts in financial advice practices in hours per week saved.
With only one-quarter of advice practices actively seeking feedback from clients, the Financial Advice Association Australia has emphasised why this is a critical tool for client retention.