Big hitters in the non-forestry agribusiness managed investment schemes (MIS) sector have been left reeling after a Government decision to axe tax relief.
Minister for Revenue Peter Dutton announced the Australian Tax Office (ATO) has reinterpreted tax laws and is preparing a draft tax ruling that will 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 has called on Minister 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. 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," Hance said.
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."
Lee said the decision was not the end of the world. Fund managers would find other suitable investment structures, like unit trusts.
"The important thing to realise is there is no other investment in Australian agribusiness on this scale - the Government has really damaged this sector," Lee said.
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.
