THE tax-effective investment world will be closely watching a major test case in the Federal Court which started this week between the Australian Taxation Office and promoter Budplan.
The case, challenging deductions of almost $60 million, will test the situations of four individual investors, including a former WA stockbroker.
Budplan was the biggest and most successful promoter in the fast growing tax-effective investment market before it ran into trouble with the ATO in about 1997.
While a system of product rulings was established in 1999 to provide some reassurance to investors, the culmination of years of fighting between promoters, investors and the ATO resulted in a big political backlash against the Federal Government earlier this year.
Several Federal politicians made high-level representations to Cabinet over the matter, including several members such as Julie Bishop, Daryl Williams and Wilson Tuckey because of the acute situation in WA where the majority of the estimated 30,000 affected people reside.
Another high level representation was made by former Deputy Prime Minister Tim Fischer who told Business News he was trying to help remove uncertainty for investors.
“I was hoping to help a number of colleagues including Barry Haase (Federal member for Kalgoorlie) to bring these test cases forward,” Mr Fischer said.
The former Deputy Prime Minister, who once opened a tea tree research centre, which was funded by a Budplan prospectus, said he believed there was still a role for such investments even though he had not invested in them himself.
But he cautioned investors to follow due process and use common sense.
“If it is drafted to be legal and passes both the ATO scrutiny and the pub smell test scrutiny then go for it,” Mr Fischer said.
“It is helping to boost boutique agriculture and exports of Australia more generally.”
With a farm of his own, Mr Fischer said he had been able to use more traditional tax arrangements, but many people had chosen the tax-effective investment route because of the feelgood factor of investing in Australia.
Unfortunately, though, few investors have had that feelgood attitude this year with the sector’s troubles being reflected in poor sales across the board.
