Australian Tree Farm Companies Deny Financial Problems

by Mary Swire, Tax-News.com, Hong Kong

01 August 2001

After tree-farmer Australian Plantation Timber (APT) went into voluntary administration on Monday, the Forestry Minister Mr Tuckey said that companies marketing tax-effective tree farming needed to be given more tax breaks - but may be he should have waited, because two other listed timber-lot investment companies, Great Southern Plantations and Timbercorp, said they were in good financial health.

APT owns 40,000 hectares of land, growing Tasmanian blue gums, primarily in Western Australia. Under APT's schemes, investors could participate both as a grower in the projects and as a shareholder in APT, the project manager and owner of the land on which the plantations are grown. It is likely that APT shareholders will lose their money but about 6,000 grower/investors may emerge with their timber lots intact. Timbercorp has written to APT's voluntary administrator, Grant Thornton's Mr Mervyn Kitay, and to the Australian Securities and Investments Commission, offering to take over responsibility for APT's timber lots.

APT called in the liquidators after the Commonwealth Bank refused to extend an A$450m loan. Yesterday Great Southern's shares closed at a low of 42.5c and Timbercorp hit a four-year low of 28.5c as investors deserted the sector, causing the companies to make their reassuring statements.

The tree-farming companies have been under financial pressure as a result of the the Tax Office's crackdown on some over-sold or even fraudulently sold schemes which has dampened investor interest.

The industry is crucial to the Government's forestry policy, which aims to treble the area of plantation timber to 3 million hectares by 2020. But the industry has been sharply criticised in the Government's Senate inquiry into mass-marketed tax-effective schemes for including inflated forecasts in their prospectuses.

The Tax Commissioner, Mr Michael Carmody, has also criticised some tax-effective agribusiness schemes for their exorbitant profits, resulting in as little as 10¢ in the dollar going into the ground. "I'm not going to apologise for taking firm action against the illegitimate arrangements," he said. But he admitted the tax system was unfair because it treated investors more harshly than those peddling illegal schemes. "Unless you can prove fraud or criminal activity, [the promoters] virtually escape scot-free," he said.

Recommended