Costello defends non-timber MIS tax ruling
Federal Treasurer Peter Costello has defended a decision by the Australian Taxation Office last week to end existing up-front tax deductions for investments in non-timber managed investment schemes (MIS) from July 1.
In an interview with ABC radio announcer John Faine, Costello also rejected a suggestion that it was the Government that had “basically abolished MIS for non-forestry investment, causing panic throughout rural Australia”.
He emphasised it was the ATO that had scrapped the immediate deduction after reconsidering its position that these MIS investments could be claimed as a tax deduction if the investors were considered to be carrying on a business.
“There is a view in the ATO (now) that if you put money into a MIS it is a capital investment.
“Just like if you bought a share, it wouldn’t give you a tax deduction for the purchase price of the share because that is a capital sum.”
The Treasurer added that a meeting of the Federal Cabinet last week had “noted the Commissioner of Taxation’s position, and that we are quite prepared to let the industry take it on in a test case”.
“If the industry wins then of course the immediate upfront deductibility would continue.”
Last week Agribusiness researcher Australian Agribusiness Group (AAG) managing director Marcus Elgin slammed Treasury for the “appalling” decision to scrap the deduction.
“It was unilaterally imposed on an industry worth hundreds of millions of dollars per annum, and will affect well over a hundred thousand shareholders and investors in companies in this sector.
“The uncertainty created by the decision, and in particular a lack of any sensible grandfathering arrangements, will potentially dry up the only substantial investment in intensive agriculture in Australia.”
He called on the Government to “act immediately” to treat all agribusiness segments in the same way it does the timber segment of the economy.
“Why are MIS almond investors, for example, going to be treated differently to about 30 per cent of farmers?”
He proposed that the Government defer the Dutton decision until June 2008 to undertake an independent review of tax deductibility for non-timber MIS.
“If tax deductibility is to be scrapped there should be a tripartite panel comprised of the Federal Government, ATO and the agri-MIS sector established to consider alternate strategies,” he said.
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