Time for Govt to reconsider agribusiness MIS sector
Tax effective managed investment schemes (MISs) are a fundamentally flawed investment structure and represent a significant risk to consumers, according to Rural Funds Management chief David Bryant.
Furthermore, the Australian Government must terminate its "living partnership" with the agribusiness MIS industry and tighten tax policies in light of the "extraordinary failure" of the industry and the losses incurred by so many Australian investors.
Bryant argued that despite the decimation of the agribusiness MIS sector over the past year, this was an issue that continued to deserve consideration.
"The enabling legislation is still law, not all of the scheme promoters have gone broke, and Australian investors continue to invest in these schemes," Bryant said.
"This tax minimisation industry has damaged its reputation more than once, but, like mug punters on the first Tuesday of November, many poor souls in the future will discard the form guide and take a plunge on a well turned out proposition."
Bryant argued that given it was the introduction of product rulings that allowed the industry to grow, the abandonment of this practice would be the best place for the Government to start extracting itself from its continuing involvement in the sector.
"At its heart, the tax effective MIS industry is a consequence of accommodating tax policy. Given the extraordinary failure of this industry, surely it is time for tax policy to be less accommodating," Bryant said.
While agribusiness MISs were widely considered by the public to be managed investments, Bryant argued that investments in tax effective MIS products were in fact not investments, but simply contracts between taxpayers and business owners in order to facilitate tax deductions.
These agreements do not carry the safety that comes with the protective legal structure of an investment trust. Furthermore, agribusiness MIS 'investments' carry high levels of risk.
"Single businesses are poorly diversified, subject to many more risks, typically contain operational leverage and are highly illiquid. The business of plantation forestry has no diversification, is subject to significant risks, experiences large variations in commodity yield and price, and is highly illiquid. As such, plantation forestry is much more risky that most investments."
Rural Funds Management, led by Bryant since 1997, was acquired by Great Southern in 2007. The group has since regained its indepedence following Great Southern's collapse.
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