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Money growing on trees

My tax bill was really big this year and my friend told me that investments into agricultural schemes can improve your tax returns. What do you think about these schemes and what do they do?

As a simple answer, let me kick off by warning you with – be careful. They used to be shockers and plenty of people have had some sad stories with these investment vehicles. On the other hand, I’ve come across some better offerings, but I still suggest you act with caution.

Typically, these schemes talk about immediate tax write-offs that can reduce your tax bill. They also refer to great long-term returns, which can be exaggerated. Also the tax office has KO’d the rights of people to claim tax deductions. Generally, if you do these things for a tax deduction and not for the product involved it worries me. The business should have a good potential if you want to consider them.

On how they work, it’s pretty simple. You buy units in the venture – there are a fixed number of units – and your money funds the operation. In the early years, the venture loses as, say, the trees grow, and this helps build up the tax deductions. After some time, income from the fully-grown trees brings income to the unit holder and this replaces the tax deductions as the reason for being in the game.

These vehicles can be used for tea trees, almonds and even olive oil. Go in with your eyes open, make sure the product involved is in big demand and don’t put too many of these eggs into your investment basket.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Friday, October 29, 2010

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