Putting Medibank back on the shelf is one thing for federal cabinet, but curtailing the tax-rorting of the rural managed investment industry must be a lot harder given the silence on the top since Monday’s meeting.

Today’s SMH Exchange column underlines how dependent the MIS companies are on the tax marketing racket by looking at what the mere announcement of a possible partial curtailing has done to their share prices since it was announced in the May budget.

Great Southern, which traded above $4 in May, closed at $2.39 yesterday. Gunns has gone from $3.30 to $2.61 over the same period. Timbercorp, which traded around the $4 mark as recently as July this year, closed at $2.33 yesterday.

The industry’s captive minister, Eric Abetz, has adopted the unusual tactic of bagging the rest of the agricultural industry as he attempts to protect the plantation company’s very generous tax breaks. The Tasmanian’s line has been that farmers shouldn’t complain about the MIS lurk as they are already picking up a billion in taxpayers’ funds themselves.

The real problem with most MIS projects is that the tax subsidy goes mainly to the promoters and their sales forces – sometimes called financial planners – and not into the ground. The gentle curtailing of the current overly-generous tax concessions shouldn’t prevent genuine investment in rural enterprise, but make it a little harder to blind punters with massive year one deductions.

If financial planners aren’t too influenced by the 10%-plus commissions that are standard in this racket, they should be guiding most of their customers into taking greater advantage of the superannuation changes anyway, instead of chasing MIS promises that seem to have some difficulty in being fulfilled.

Meanwhile Gunns has come over all environmentally concerned as part of its lobbying on the issue – chairman John Gay telling The Oz his company will have to cut down more native forests if the tax breaks are wound back.

Mr Gay said any crackdown on MIS would make it far more difficult to build his company’s planned mill in northern Tasmania — the single biggest forestry project in Australian history.

“It would make it a lot, lot more difficult and we would have to have a lot more native forests available to us,” he said.

And that’s predictably being backed by the Tasmanian Premier.

Gunns shares were up 3 cents in early trade this morning, Great Southern and Timbercorp down a tad.

Peter Fray

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