It may be time to invest in a drag queen, or even an old porker. After all, the unlikely tale of a talking pig with an identity crisis and his farmyard friends cost a mere $US27 million ($A43 million) to tell, yet it reaped $US245 million at the box office - a nine-fold gross profit.
But while the mums and dads who invested in Babe walked away with a healthy return, many others in different schemes were burnt. And many more may soon fall victim.
At this time of year, as people consider the tax implications of their investments, schemes ranging from eucalyptus plantations to film production are marketed to "mum and dad" investors offering "fantastic tax-effective opportunities".
It is true that tax laws specifically provide significant breaks for investments in primary production and films, but it can be difficult for investors to know where the Tax Office draws the line between "legitimate" tax-effective investments and "tax avoidance".
The problem is endemic in the agribusiness sector, where thousands of investors have lost money in tea-tree plantations, olive groves, ostrich farms and vineyards over recent years. Last year the independent research firm van Eyk Capital studied 61 schemes with a total of $350 million under management - it recommended just four, says director of agribusiness research Harry Sookias.
"These funds are illiquid investments, which is why investors have to look at them fairly carefully before they invest," he says.
van Eyk, which only looks at agribusiness schemes, examines three aspects of funds to determine investment viability: whether the manager can grow it, whether they can sell it, and whether there is good value for money.
"It is all a matter of how the investment is structured," says Perpetual Investment financial planning head Steven Davis, who is generally opposed to tax minimisation schemes. "We believe there is no point in losing a dollar to save 48.5 cents in tax. The most important issue investors should always consider is the quality of the underlying investment."
Investing in filmmaking holds a certain appeal for many small investors, but you're unlikely to find yourself walking down the red carpet with the likes of Nicole Kidman on opening night.
Investors in the Australian-made Moulin Rouge were burnt when the Federal Court ruled that the scheme was really tax avoidance because the investors had loss insurance, so were not risking their money. This made their investment ineligible for a tax break under Division 10B of the Tax Act.
"There can be no guarantees as to either the availability of tax deductions, the projected investment returns, or, for that matter, the return of the original investment," says Mr Davis.
Still, since the late 1970s, successive governments have encouraged investment in Australian filmmaking. In 1980 the Fraser government granted a 150 per cent tax concession for film investors. This meant that for each dollar invested, investors could write-off $1.50 against their income. Fifty per cent of income was also tax exempt.
However, the generous concessions led to some highly speculative investments - and some really bad films - and governments have since reduced the level of deduction to 100 per cent.
The rules have also been tightened. Under the present government, the film must appear to be commercially viable; it must be properly and tightly budgeted; and the investor's money must be at risk. They must also have a product ruling from the tax department.
Still, not even a product ruling is a guarantee that your claimed deductions will be accepted. If the Tax Office deems that the managers of the film fund have not adhered to the prospectus, it can reject all claims.
Paul Banks, an associate director in investment banking at Macquarie Bank, says the merchant bank's joint film fund, now in its second year, fulfils both the Government's and Tax Office's requirements.
"When we look at any alternative investment we're looking firstly at the commercial merit, then the return and the way we can structure it," he says.
"In particular some of the tax angles we can effectively structure to deliver either a more certain return to investors, or a bigger return."
Macquarie got into the sector in 1998 following a Federal Government review of film financing by Hoyts chairman David Gonski that advocated a radical policy change. No longer relying solely on government subsidies with tax breaks under section 10BA of the Tax Act, the review proposed a new mechanism: Film Licensed Investment Companies (Flics), with tax advantages for investors.
The plan was to replace 10BA with special private-sector investment companies that would allow more generous deductions. Two companies - Macquarie Film Corporation and Content Capital - were eventually licensed, and they raised up to $40 million in concessional capital over two years.
While the future of Flics won't be known until the budget is brought down tomorrow night, Macquarie has joined Hoyts and Channel Nine to create the Macquarie Nine Film & Television Fund.
"We are convinced there is a commercial argument that supports the industry," says Mr Banks, adding that the fund aims to raise at least $20 million by June 30 with a minimum investment of $5275 for each retail investor.
The fund promises a guaranteed minimum income of 55 cents of every dollar invested over the seven-year fixed term of the fund. This is made possible by the pre-sale of television series to Channel Nine, which will also help to promote the films when released.
Mr Banks says the mixture of TV shows - this year McLeod's Daughters and Bachelor Kisses - and film provides diversity, while making possible breakout successes like Crackerjack, which was funded by Macquarie under the Flics scheme and became Australia's highest-grossing film last year.
For someone who invests $100, Mr Banks says, ignoring fees, they will receive $48.50 as a 100 per cent tax deduction on top of a guaranteed income of $28.33, giving a return of $76.83, even if no films make a profit.
Apart from banking on box-office success, the fund is also hoping to generate revenue from the sale in the growing markets of DVDs, videos and pay TV.
