A battle is brewing between managers of non-forestry managed investment schemes (MIS) and the treasury after the Australian Tax Office (ATO) released a draft taxation ruling.
Investors in MIS are not carrying on a business, but are "passive investors" it states.
Contributors are, therefore, not entitled to receive tax deductions and as a result lucrative tax breaks for investors in new non-forestry MIS will end on July 1, 2008.
"Our reconsidered view is that investor contributions to such schemes are capital expenditure and therefore not deductible," Tax Commissioner Michael D'Ascenzo said.
Developments in case law required the ATO to reconsider its position on the income tax deductibility of investments in MIS.
"We are currently digesting the draft ruling from the ATO. Obviously, we don't agree with its basic premise that our growers are passive investors," Great Southern Group of Companies public relations manager David Ikin said.
"It has been upheld for many years that growers in agribusiness managed investment schemes are carrying on a business and we will continue to pursue all possible avenues to have this matter resolved satisfactorily."
Australian Agribusiness Group executive director and head of research Tim Lee said: "I certainly don't agree that (contributions to non-forestry MIS) are capital expenditure. In the past the ATO has considered them management and lease fees. I don't know what's changed their minds."
"The main issue that no-one seems to be talking about is where is investment in agriculture going to come from? MIS are successful vehicles for large scale investments."
Comments on the draft taxation ruling must be submitted by May 25.
