The managed investment scheme (MIS) model has proven to be “commercially unsustainable”, according to the New South Wales Farmers’ Association.
The association’s view is contained in its submission to the parliamentary inquiry into MIS’s. The association believes that the decision to invest in a MIS is based on the “tax deductibility of the investment rather than any interest in the entity’s long-term profitability”. Furthermore, the submission states that the MIS remunerative system “ensures only a small proportion of investor funding makes it as capital for the business operation”. This significantly impedes the longer-term viability of the operation.
“No commercially focused business can afford to pay the substantial commissions and fees MIS’s reportedly paid and expect to remain both competitive and financially viable,” the association’s submission states.
The Product Disclosure Statements issued within the agribusiness MIS sector are also “very general or delivered in a style that demanded interpretation” from advisers who, “in many instances, were offered significant commissions from the sale of MIS products”.
The association’s submission pointed to the fact that every other OECD country has rejected MIS’s. The recent slowdown in inflows into MIS’s in Australia is also “indicative of the perception that MIS’s are not sound investment decisions”.
