Federal Court’s MIS ruling highlights need to change the law

ON FRIDAY the Federal Court of Australia handed down its ruling on the Managed Investment Scheme (MIS) Test Case, finding that investor contributions in the controversial practice are, to the letter of the law, eligible for a tax deduction. “The Federal Court’s ruling, by definition, is a question of the existing law,” National Farmers’ Federation (NFF) Vice-President Charles Burke explained today. “Our concern is not that MIS is lawful, but whether it is appropriate and, therefore, that the law itself needs to change… that’s a political decision the Australian Government has to resolve. “Despite the law as it stands, few dispute the reality that investment decisions in MIS companies and their activities are overwhelmingly based on one thing, upfront tax deductibility. Remove this taxpayer funded rebate on MIS investments and there is often little, if anything, to attract investors. “As a result, MIS primarily focus on industries with a high proportion of upfront expenses, with little, if any, regard to generating output returns. In other words, they are rarely genuine long-term investments. “While this highly questionable practice persists, genuine investment decisions in regional Australia are skewing land use and resource allocations, while distorting property values. “Therefore, the Federal Court’s ruling has no bearing on the real issue, which is that the MIS mechanism does often not promote sound investment decisions in regional Australia. “The NFF will continue to work with the Australian Government, through its review of agribusiness MIS, to argue the case that while farmers support investment in agriculture, MIS is not the most appropriate vehicle for regional Australia, particularly when fundamental land use decisions are involved. “Australian farmers are actively engaging in the Government’s review of non-forestry MIS, which is taking an evidence-based approach to whether these schemes are appropriate for attracting investment into regional Australia.” The NFF’s submission to the review is available online at: http://www.nff.org.au/policy/submissions.html[Submissions to Government] [ENDS]