Big hitters in the non-forestry agribusiness managed investment schemes (MIS) sector are reeling after a Federal Government decision to axe tax relief.
Revenue Minister Peter Dutton announced the Australian Taxation Office (ATO) had reinterpreted tax laws and was preparing a draft tax ruling that would apply to non-forestry MIS after June 30.
From July 1, investors will no longer be able to claim tax relief on the basis that they are 'carrying on a business'.
Timbercorp chief executive officer Robert Hance called on Dutton to launch an inquiry into non-forestry MIS and test the position of the ATO in court.
"Timbercorp does not accept the new view of the ATO regarding carrying on a business," Hance said.
"For more than 10 years the ATO has been ruling that investors are carrying on a business.
"Given that there has been no change in legislation or any new cases to support its position, the decision is arbitrary and untested."
Australian Agribusiness Group director Tim Lee said: "It all comes down to the interpretation of the term 'carrying on a business'.
"The Government's interpretation is quite different to that of the public. I'd say investing $50,000 in an almond orchard was carrying on a business.
"We are very disappointed. This is very sudden. There is no grandfather provision in place; the Government is effectively closing the non-forestry projects off [to tax breaks] in five months' time.
"According to agribusiness investment research house Adviser Edge, there were 38 non-forestry MIS, which comprised 22 horticultural projects, such as olives and nuts, eight wine projects and eight others, which included truffles and pearls.
There are 29 forestry agribusiness MIS, which include 16 traditional pulp wood and 13 non-traditional, like mahogany.
In December, the Government said investors in forestry MIS would still be entitled to a 100 per cent up-front deduction on investments provided at least 70 per cent of the expenditure went towards developing forestry.
