Agribusiness is now a common managed investment option for investors. Agricultural investments fall into two main categories, forestry and non-forestry. Forestry managed investment schemes have the purpose of establishing and tending trees for felling. Non-forestry managed investment schemes include horticultural investments such as nuts, olives, citrus fruits, stone fruits, apples, truffles, wine, breeding animals, abalone, and pearls.
Investors in agribusiness schemes are treated by the ATO as primary producers carrying on a business in agriculture, forestry or horticulture for the purpose of generating income. This means the ATO applies the same tax treatment to agribusiness managed investment scheme investors as they do to farmers.
These schemes are typically very tax efficient as the investments are structured so the majority of the investment is tax deductible (whether in year one or over several years). For an investor on the top tax bracket of 47% a $10,000 investment could produce a $4,700 tax refund.
In recent years agribusiness schemes have failed in great numbers and investors have lost billions of dollars. The Australian Securities and Investments Commission (ASIC) recommends that investors get independent financial advice before signing up to an investment. Further details are available at www.moneysmart.gov.au.
Some of the risks involved in investing in agribusiness schemes include the scheme may run out of money and fold, the requirement to make additional annual payments for management fees, the returns are hard to predict as the weather, demand, world-wide prices, crop yields, and costs are subject to wide annual fluctuations, and the investment is poorly diversified.