Fresh from claiming Tasmania’s bushfires are the wrath of God brought down in punishment for not logging old growth forests – well, nearly – Forestry Minister Eric Abetz has delivered a big win in Federal Cabinet for his tax exploitation constituency.
The government made official yesterday what the AFR and Oz reported a week ago – the tax-driven forestry managed investment schemes keep their very generous deductions with just a token adjustment to mollify the many MIS critics within the government.
The cabinet jury is still out though on what might be done to the non-forestry MIS industry – it looks like the promoters of grape, olive, pearl and aardvark farms aren’t nearly as well organised a lobby, or perhaps as generous in the political donations.
Of passing interest is the different spin this story is capable of wearing. The AFR’s Fleur Anderson saw the forestry mob escaping very lightly from the taxation review while the Oz’s Steve Lewis painted it as a major crackdown. I’d say Anderson got it right. All the trees-for-tax-deductions brigade have to do to keep their salesmen busy is to arrange for 70 per cent of investors money to actually go on “tree husbandry”. Some schemes have spent less than 50 cents in the dollar on tree growing business while taking out commissions that would make Westpoint blush.
The 70 per cent hurdle won’t be hard to meet – and I’m sure you won’t be surprised to find just how expensive it can suddenly be to grow trees. As the Smage reports:
Agribusiness consultant and valuer Sam Paton criticised the fact that tree husbandry included rental and lease payments over the life of the plantation.
The actual cost of establishing plantations in the first year was $1900, yet MIS companies charged investors $7000-$9000 per hectare. The Government was effectively subsidising large lease payments, he said.
No, not the government, we tax payers are doing the subsidising. The funny bit in this, if you like irony, is that the government is using Kyoto as the excuse for letting the good times keep rolling for specialist promoters like Timbercorp and Great Southern Plantations.
The only hope is that the government might get serious about pushing for a secondary market in these illiquid plantation schemes. Then investors might at least understand that they’re really not making much of an investment even with the tax breaks. Nothing like seeing the value of a punt fall sharply to make a fella regret backing a horse. Or tree.