Stuart Robert (Fadden, Liberal Party) Share this | Hansard source

I rise to lend bipartisan support to the Parliamentary Joint Committee on Corporations and Financial Services report into Aspects of agribusiness managed investment schemes. I thank the committee secretariat for their hard work, my colleagues on the committee and all those who gave submissions and put so much work into achieving an outcome.

Managed investment schemes began with bipartisan support. In time over 5,000 registered MISs have come into being, operated by over 670 responsible entities. While it is difficult to quantify, there are some indications that almost a third of a trillion dollars is in funds management across listed and unlisted schemes, with at least 110 listed managed investment schemes. At Senate estimates on 4 June 2009, ASIC provided an overview of the managed investment schemes sector. They said it is:

... a generic term to describe a variety of structures for the creation and operation of collecting investment schemes or projects. Basically, it covers everything that involves an investor acquiring something other than a security; that is, a share or a debenture or an interest in a prudentially regulated entity such as a bank deposit, a superannuation interest or a life interest. The sector includes things like managed funds; public unit trusts; ASX listed trusts; common funds; limited partnerships; investment pools and clubs; cash management trusts; property trusts; property syndicates; mortgage trusts; serviced strata schemes; agricultural schemes including forestry, horticulture, viticulture; and alternative investment schemes such as horse racing syndicates.

As you can see, the managed investment scheme within Australia is both broad in its reach and deep in its investment opportunities. It is also an incredibly large industry employer, especially at a time when jobs are so fundamental to the economy.

Yet all industry needs certainty, and no industry more than the managed investment scheme industry needs certainty within its investment architecture. For some years that certainty has not existed. The history of MISs in this country, especially with ATO product rulings and federal court interpretations, has made that certainty uncertain. We have seen project sinking funds being used as cross-collateral for other projects and investor books cross-sold as quasi-derivative products to banks and other institutions. All of these practices have taken away the certainty that this industry needs.

The spectacular collapses of Great Southern and Timbercorp precipitated the committee’s inquiry into managed investment schemes. The inquiry is making three key recommendations. The first is that the government consider investigating and modelling the effects of amending the Income Tax Assessment Act to ensure that tax deductions for non-forestry agribusiness MIS investment, under the general business deduction provisions of the ITAA, are permitted to be offset only against future taxable income from the same MIS. In some way drawing on the precedent of how investment and property losses are only claimed against future investment or property income, the same recommendation applies. The committee took much evidence that non-forestry agribusiness MISs have the capacity to stand on their own two feet, and the spectacular collapses of great Southern and Timbercorp will make investors more wary and look more into the details of the managed investment schemes.

The second recommendation is that the government amend the Corporations Act to require ASIC to appoint a temporary responsible entity when a registered managed investment scheme becomes externally administered or a liquidator is appointed. This recommendation is fundamental to ensuring the integrity of managed investment schemes so that the whole shooting match of MISs, of which many may be under one responsible entity, are not sold up and liquidated where a responsible entity could salvage some of them. The third recommendation is to require agribusiness MISs to disclose the qualifications and accreditation of third parties that provide expert opinion on likely scheme performances.

I look forward to a rejuvenated MIS industry that heeds the lessons of the past, works closely with rural communities and operates sound business models that can withstand difficult conditions in the future.

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