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ATO to Scrap tax breaks

Discussion in 'Accounting, Tax & Legal' started by Redwing, 12th Apr, 2007.

  1. Redwing

    Redwing Well-Known Member

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    Geoff posted this at Somersoft, but its probably relevant here as well


    ATO details reasons behind tax law changes. 11/04/2007. ABC News Online

     
  2. Here_To_Learn

    Here_To_Learn Well-Known Member

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    My understanding is that this is the last year to get into any non-forestry investment and claim the up front deduction.

    I will be purchasing vineyards this year thru Navra's group. 80% deduction first year then 10% second and third years. Income should begin after 15mths.

    Fingers crossed !
     
  3. Nigel Ward

    Nigel Ward Team InvestEd

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    An important distinction to make here is between the ATO's interpretation of the law and what the law ultimately actually is.

    The ATO doesn't always get it right, and in fact it was recently severely rapped across the knuckles over its stubborn insistence on a wrong interpretation in relation to employee benefit trusts.

    The courts ultimately decide what the law means. Parliament can of course change the law and then the game starts again...

    Practically though, you need to be in a financial position to fight because you've got to pay first and then argue the toss :rolleyes:

    Better perhaps to not live on the bleeding edge when it comes to tax issues?

    A matter of personal risk assessment I guess.

    Cheers
    N.
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Actually no - they extended it for another year ... so you can get the deduction this year (06/07) and again next year (07/08).

    The new rules will now come into force as of July 1, 2008.
     
  5. Here_To_Learn

    Here_To_Learn Well-Known Member

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    Sim, thanks for clarifying ...
     
  6. NickM

    NickM Co-founder Staff Member

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    SIm is right.
    As is Nigel, however for these types of investments / fund managers will have a product ruling on their product/pds. In your tax return this product ruling is detailed so that the ATO know what you have invested in. I would be reluctant to invest in any type of product of this nature without a product ruling.

    NIckM
     
  7. Here_To_Learn

    Here_To_Learn Well-Known Member

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    I am pretty sure the Great Southern scheme promoted by Steve has the ruling.
     
  8. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    It does have a ruling (details can be downloaded from the Great Southern website).

    The trick with these product rulings is that the company running the investment scheme must adhere to the details of the ruling exactly, otherwise that ruling will be deemed null-and-void by the ATO. This is what has caused people grief in the past when the ATO has disallowed deductions even when a product ruling was in place. Poor management is usually to blame I think.

    You really only want to be investing with a company that has a track record of being able to administer their scheme to the satisfaction of the ATO - thus minimising potential problems for yourself.

    Using an ASX listed company like Great Southern (for example) is a reasonably sound strategy in my opinion, given that there is (in general) greater transparency required of listed companies over those which are unlisted. This greater public scruitiny should (in theory) help identify potential risks and problems.

    That's not to say that an unlisted company can't or won't be as good - you just have to be more careful with your due diligence. Of course, there's also no guarantee that a listed company will do the right thing :rolleyes:
     
  9. Redwing

    Redwing Well-Known Member

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    Got sent this via e-mail today as well, which was an interesting read


     
  10. Here_To_Learn

    Here_To_Learn Well-Known Member

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    If only Steve was around to reply !
     
  11. Leandro

    Leandro Well-Known Member

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    If you are investing into a Great Southern plantation agribusiness project via the NavraInvest methodology, i.e. using the tax refund to purchase units in the Navra fund, then the return from the agribusiness is not as important. Sure it is great if it makes a return, as this all adds to the investors bottom line, but at the end of the day it still won't necessarily make the investment a bad one if the Navra fund does well.
     
  12. Redwing

    Redwing Well-Known Member

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    I still dont fully comprehend the NAVRA/GTP strategy and benefits Leandro are you able to "dumb it down" for me :confused:
     
  13. Leandro

    Leandro Well-Known Member

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    Hey Redwing,

    It actually isn't that complicated.

    Just before the financial year ends, you purchase vinelots in the GTP grapes project. The money to buy this is financed via GTP. After the end of the financial year, you lodge your return and include this purchase as a deduction against your income (reducing it to a precalculated amount). The deduction is 100% of the application price (80 1st year, 10% 2nd and 3rd year).

    The ATO then gives you a refund of 80% in the first year. This money is taken and then invested into the Navra Fund and margined up to a level that you are comfortable with.

    The quarterly return from the Navra fund and any annual return provided by the grapes hopefully covers the total cost of the loan which you have with GTP.

    The benefits are that after the GTP loan is paid out, you are left with units in the Navra fund which were bought with money that would have gone to the taxman, never to be seen again. Hopefully, the units have also experienced some Capital Growth. And finally, the grapes might actually make some money in the remaining years (it is a 20 year project).

    The risks are that the loan amount is not covered by the returns from Navra/GTP and you have to pay money on top. That the grapes don't make a return at all, and you are asked to help cover some of the costs of running the project. Or if an insured event occurs, you have to pay the excess. If an uninsured event occurs, i believe if the damage is too significant, your deal with GTP ends and you have to continue to pay out the loan, which wouldn't be a problem if the Navra fund is still performing well.
     
  14. NickM

    NickM Co-founder Staff Member

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    Be aware that the ATO "May" disallow deductions from Yr 3 onwards for the non forestry products.

    With that in mind, any investors should primarily focus on what you do with the tax refund. If you can make the numbers work for you assuming that the deductions and the future returns may not be there then it deserves further consideration.

    Of course as inteliigent investors, you should also fully research the wine industry and what the experts are forecasting for the next couple of years in regard to sales and supply.

    You would if it was real estate

    NickM
     
  15. Leandro

    Leandro Well-Known Member

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    Would the deductions that they "may" disallow after year 3, also include any interest which is being incurred on the loan which was used to invest in the scheme? Could you please clarify which deductions are at risk.

    Thanks
     
  16. NickM

    NickM Co-founder Staff Member

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    The ruling is in draft format at the moment and my understanding is that only the lease payments would be disallowed. The industry is saying that they can get around this as long as they are primary producers.
    all we can do is watch this space
    NickM
     
  17. Leandro

    Leandro Well-Known Member

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    Hey Nick,

    Just a clarification in regards by what you mean by "lease payments". I am not sure if you are familiar with the Great Southern project which Navra is offering, but in this context i think you mean the annual management fee that they charge the "investor/grower"?

    Thanks
     
  18. NickM

    NickM Co-founder Staff Member

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    yes the ann management fee. Spoke to a rep from a similar organisation and they are not worried about the ATO draft ruling. But i guess they will all say that
    NickM
     
  19. Leandro

    Leandro Well-Known Member

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    Thanks Nick.

    So are you using an agribusiness investment this year to minimise your tax, or have in the past? (I will understand if this is personal information that you don't want to divulge)

    I personally am going ahead with a relatively small investment (compared to others Navra clients) in the Great Southern Plantations project. I didn't least year.