Australian agriculture is facing a wave of restructures, asset sales and strategic reviews as a seven-year tax change notice period expires.
Duncan Bedford, a Brisbane-based McCullough Robertson Lawyers partner, said investment funds that had previously operated through Managed Investment Trusts (MITs) were confronting a different tax landscape from July 1, 2026.
The change stems from reforms introduced by the Federal Government in 2019 that altered the tax treatment of agricultural investments held through MITs.
While existing investments were granted a concessional seven-year grandfathering period, Mr Bedford said that transition window was now closed.
MIT structures have been widely used by foreign investors seeking exposure to Australian agriculture.
Under the previous arrangements, foreign investors could access a concessional 15 percent withholding tax rate on certain rental income generated from agricultural land and derived via an MIT.
“This meant a foreign fund could buy a farm in Australia, lease it out to their next-door neighbour, generate rental income and pass that rental income out to its investors at just 15 percent tax,” Bedford said.
“Fifteen percent is as low as any tax rate you will get in Australia.”
In 2019, Australia changed its tax rules on MITs, increasing the tax to 30 percent for income generated from agricultural land, equal to (or slightly higher than) the Australian corporate tax rate. The existing regime was grandfathered through to June 30, 2026 to allow time for restructuring, if required to address the changes.
Mr Bedford said that, as a result, many funds were now reassessing whether their current arrangements continued to make sense.
“We are now seeing a lot of restructuring of, and potential exit from, investments that were held through those MITs,” he said.
“The impact will vary from fund to fund but I expect a mix of fund closures, ownership restructures and portfolio reviews as investors and fund managers determine how best to respond.”
Mr Bedford said some funds may decide to exit their investments altogether.
“The challenge for many investors is that the structures were specifically designed around a concessional tax environment that no longer exists,” he said.
“So, there may be more assets coming on the market.”
The transition is not necessarily straightforward.
One of the unintended consequences of the reforms is that restructuring itself can create additional costs, particularly at a state level.
“If you try and restructure out of these MIT structures, you often get hit with state stamp duty,” Mr Bedford said.
“The federal rules don’t always talk to the state rules.”
That means some investors could find themselves paying significant transaction costs simply to adapt to a federal tax change.
Mr Bedford said this change from July 1, 2026, together with recently announced changes to the taxation of trusts for Australian taxpayers, could result in one of the most significant periods of structural change in agricultural investment in decades.
“I expect this period of adjustment will play out over the next several years,” he said.
