nationwide agribusiness

AGRIBUSINESS

What is Agribusiness and what are Agribusiness Investments?

Agribusiness is a sector within the primary production industry. In Australia, agribusiness is typically broken down into the following sub-sectors within which investors can get involved.

The three main agribusiness investment categories are:

Forestry Investments
Other Horticulture Investments
Aquaculture Investments

Forestry Investments

Forestry investments are projects for the planting, growing, harvesting and managing of tree plantations with locations nationwide. Australia has already a strong presence of tree plantations with strongholds in Tasmania, in the south of Western Australia, Kununurra, the Green Triangle between Victoria, New South Wales, South Australia, southern Victoria and between Victoria and New South Wales. Pockets of tree plantations exist along the eastern coastline far up into Far North Queensland.

Tree plantations are also called timber plantations and locations vary depending on the climate that provides the ideal environment to grow a particular tree species. Timber production is categorized into different sub-types depending on its use and end markets. Pulpwood is a timber category which is produced from eucalypt trees that are then processed into wood chip or paper. Sandalwood can be used for fragrances, oils, perfumes and cosmetics. Red mahogany is grown for structural timber flooring and furniture whereas teak is a high quality timber for decking, indoor and outdoor furniture and boat building. Radiata pine can be used for decorative veneers, structural lumber and reconstituted wood products. Different timber can also be grouped into Softwoods and Hardwoods. There is also the use of trees such as oak trees for the production of renewable energy. This is generally summarized as biomass production.

Other Horticulture Investments

Other horticulture investments include projects other than timber plantations. These are the cultivation, crop production, harvesting and managing of grape, walnut, almond and other nut plantations. There are strong domestic and international markets for the use of seasonal horticulture harvests. One of the key differentiators for horticulture plantations are the seasonal opposites between the southern and northern hemisphere resulting in crop being produced in Australian, exported and marketed overseas when other countries in the world cannot.

Aquaculture Investments

Aquaculture investments are for the farming of plants or animals living in the water. Major projects are for the production of Australian salmon and barramundi, shrimps, oysters and abalone to name just a few. Investors have mainly been able to get exposure to abalone farming in South Australia. There is a market for the highly regarded Greenlip abalone which is the highest value Australian seafood export per kilogram. Abalone production in Australia is unique all abalone are ocean grown which produces a premium quality product supplied to a market with large demand internationally.

Investment growth in any market

The growth of agribusiness projects depends on the natural environment, available natural resources and how well an agribusiness operator looks after the plantation. There is no direct connection between the growth rate of natural products such as timber, walnuts or abalone to financial markets. Growth is steady according to nature and no matter how bad a recession affects the general economy.

Growth is typically long term with projects returning and income from year 3 up to year 25. For example, abalone are farmed over a 7 year period with 3 growth cycles of 28 months per cycle achieving up to 20% returns whereas radiata pine is grown over 25 years with thinnings approximately in years 13 and 18.

Did you know that an agribusiness investment is 100% tax deductible in Australia?

Agribusiness investments are structured in projects and each agribusiness operator issues new projects every year. Good quality projects are vetted from every angle by independent research houses and rated for example through star ratings like managed funds. Agribusiness projects are also known as Managed Investment Schemes (MIS) for which operators can apply for a specific tax ruling called product ruling from the Australian Taxation Office. If approved an investor will be able to generally deduct the full investment amount, i.e. 100% of the purchase price in the financial year that the investment was bought.

Note that this is a significant difference to, e.g. an investment property loan of $100,000 (100%) for which you can only deduct prepaid interest for up to 12 months at the prevailing interest rate. If the interest rate was 8% then $8,000 could be deducted from your taxable income. If you make an agribusiness investment, 100% of the investment can be deducted, i.e. $100,000 would be deductible. If the entire investment is fully funded by an investment loan the interest can also be deducted. This way up to $108,000 could be deductible immediately.

This is the reason why agribusiness investments are so powerful.

Financial Planning Strategies

There is a myriad of financial planning strategies that then can be applied. We also know that the investment will grow regardless of any market circumstances and at the same time is providing compelling tax advantages for the investor. Investment amounts start from as low as $4,500 per investment unit. Units can be bought in any multiples.

Agribusiness investing can be used as a solution to:

reduce or eliminate bad debt such as credit card debt or home loans
reduce HECS education loans fast and get the 10% government bonus
reduce or offset completely any extraordinary capital gains tax obligations
plan for retirement income streams and passive incomes
create wealth and save for goals such as a first home deposit, a world trip, university funding for children, grandchildren etc.

We have linked this example from one of our agri operators for you to look at. It illustrates the scenario of reducing a non-deductible mortgage and replace it with deductible investments to create wealth for the future. See also these further agribusiness financial planning strategies available for download.

Agribusiness Workshop
Agribusiness Strategies
Timber Plantations
Walnut Plantations
Abalone Farming