Building Income and Wealth Using Agribusiness Investment
Australian agribusiness is a billion dollar export industry impacting economic factors such as regional employment, trade relations and economic growth.
Investment in agribusiness can have many rewarding aspects.
It is recognised as a tax effective investment particularly valuable for individuals paying the highest marginal tax rate and it also allows the investor to diversify their investment portfolio.
Agribusiness is favoured as an alternative asset class due to its performance being less influenced by the sharemarket, property market or the current level of interest rates.
The most notable contributing factor of the industry’s progress, is the increased security and assurance provided by the Australian Taxation Office (ATO) with the introduction of the ATO Product Ruling system in 1998 which provides tax certainty on the availability of tax deductions for investing in agribusiness projects.#
Other major benefits of agribusiness investment include:
- Portfolio diversification
- Tax effectiveness as outlined by the relevant ATO product ruling with the investor usually receiving an upfront tax deduction for some or all of the initial and ongoing cost of their investment.
- Good expected investment returns over the long term.
It is important that any upfront tax deductions gained through investment in agribusiness schemes be utilised in a constructive way. The following strategies illustrate how agribusiness can be used in a wealth creation plan:
- Building a Diversified Portfolio
You may apply the tax and the GST refunds (for investors who are registered for GST) from the agribusiness investment to fund other types of investments. Consequently, you can build a stronger diversified portfolio to accumulate long term wealth.
- Managing Tax and Personal Debt
Alternatively you could use the GST refund (for investors who are registered for GST) and tax savings to repay personal debt.
- Replace Bad Debt with Good Debt
Reduce non-deductible debt, whilst taking on additional deductible debt to create new growth opportunities.
#In a press release dated 6th February 2007, the government announced that the ATO has indicated that it will reconsider its interpretation of the current taxation law as it applies to both forestry and non-forestry Managed Investment Scheme (MIS) investments and that its reconsidered position will apply to arrangements entered into after 30 June 2007. However, following industry lobbying, the ATO has since extended a transitional and consultation period on these changes to 30 June 2008 and now intends to apply their reconsidered view on the treatment of agribusiness schemes from 1 July 2008.
The impact of this change will likely be that investors in MIS will no longer be able to claim upfront deductions for their contributions to an agribusiness MIS on the basis that the investor is ‘carrying on a business’. Investments in MIS that are covered by existing product rulings that allow immediate deductibility for the investor’s initial contribution, and for contributions in subsequent years, will be protected (provided the MIS continues to operate in the manner described in the application for the product ruling).
However, the government also announced that under new legislation with effect from 1 July 2007, investors in forestry MIS will be entitled to an upfront tax deduction for all expenditure, provided that at least 70 per cent of the expenditure is directly related to developing forestry.
If you would like to learn more about these projects or would like more information simply follow this link: Enquiries and mention "Agribusiness Investment".
Source: Personal Wealth
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