The amount raised in the tax-effective investment sector has fallen for the third year, to about $300 million from a high of $1.5 billion in 1999. Gary Kleyn and Mark Beyer report on the latest developments.
KEEN pricing and strong brands were the keys to success in the shrinking tax-effective investment sector last financial year.
For the third year in succession, the amount raised in tax-effective managed investment schemes (MIS) declined sharply, to between $300 million and $330 million.
This was down from about $550 million in 2001 and a peak of $1.5 billion in 1999, according to research group Agribusiness Research.
The lingering effects of the Australian Tax Office crackdown on ‘pre-1998’ tax minimisation schemes, and recent court decisions on those schemes, are still adversely affecting the industry.
“Major factors in the decline were the Budplan decision going in favour of the ATO, general caution among financial planners and investors and professional indemnity issues,” Agribusiness Research managing director Shane Kelly said.
There were 45 projects in the market last year, in industries as diverse as eucalypts, sandalwood, wine, olives, cotton, almonds, teak and pine.
Yet three project managers accounted for a whopping 50 per cent of the total funds raised.
Tasmanian forestry company Gunns raised $60 million, the largest of any scheme manager.
Its Woodlot Project 2002 was made particularly attractive by the low fees, which were up to half of those for comparable projects, according to PIR Agribusiness.
The other dominant project managers were Perth-based Great Southern, which increased sales one third to $56 million, and Timbercorp, which lifted sales 7 per cent to $46 million.
Mr Kelly attributed much of their success to very strong distribution networks among investment advisers and accountants.
“Perhaps, with the exception of ITC and Palandri Wines, there are no other project managers capable of challenging the dominant foothold these three now have,” he said.
ITC was adversely affected last year by the delayed takeover of failed project manager Integrated Tree Cropping.
It raised approximately $10 million through a mix of managed schemes and private forestry arrangements.
Palandri has not disclosed the amount raised, as its capital raising is still open, though industry sources have estimated about $20 million plus.
Two recently announced moves in the industry signal the prospect of continued restructuring.
Barkworth Olives and Origin Olives have announced a 50-50 merger, bringing together the two largest Australian brands – Viva and Gwydir Grove – under one company structure.
The merged company will be up against the two big olive project managers in Timbercorp and Australian Olives.
In the timber sector, Yates has announced plans to sell its forestry management business after raising just $4.1 million last year.
Great Southern is one company poised for expansion, based on last year’s success and its debt-free balance sheet.
“We are extremely well placed to achieve strong growth in our core business activities, and we will also begin to explore diversification opportunities, which may include targeting acquisitions,” Great Southern managing director John Young said.
Great Southern is a specialist timber project manager and any diversification would be akin to changes implemented by Timbercorp, which has added olives and almonds to its core forestry projects over the past few years.
Assessing the sector’s prospects, Mr Kelly noted that start-up projects again found it difficult to gain access to distribution networks last year.
“Any recovery is likely to be slow and the industry in general will only succeed in the long-term if the quality of projects on offer continues the improvement that has been evident over the past 12 months,” he said.
Mr Kelly has predicted a more conservative range of projects this year.
For instance, paulownia tree projects did not fare well and he expects a decline in the number of these projects on offer.
Pricing is likely to be lower, in some cases because investors will receive more land or trees for the same dollar contribution.
Mr Kelly said olive projects, which had been criticised in the past for unduly optimistic yield and sales projections, were becoming “much more realistic”.
For the third year in succession, the amount raised in tax-effective managed investment schemes (MIS) declined sharply, to between $300 million and $330 million.
This was down from about $550 million in 2001 and a peak of $1.5 billion in 1999, according to research group Agribusiness Research.
The lingering effects of the Australian Tax Office crackdown on ‘pre-1998’ tax minimisation schemes, and recent court decisions on those schemes, are still adversely affecting the industry.
“Major factors in the decline were the Budplan decision going in favour of the ATO, general caution among financial planners and investors and professional indemnity issues,” Agribusiness Research managing director Shane Kelly said.
There were 45 projects in the market last year, in industries as diverse as eucalypts, sandalwood, wine, olives, cotton, almonds, teak and pine.
Yet three project managers accounted for a whopping 50 per cent of the total funds raised.
Tasmanian forestry company Gunns raised $60 million, the largest of any scheme manager.
Its Woodlot Project 2002 was made particularly attractive by the low fees, which were up to half of those for comparable projects, according to PIR Agribusiness.
The other dominant project managers were Perth-based Great Southern, which increased sales one third to $56 million, and Timbercorp, which lifted sales 7 per cent to $46 million.
Mr Kelly attributed much of their success to very strong distribution networks among investment advisers and accountants.
“Perhaps, with the exception of ITC and Palandri Wines, there are no other project managers capable of challenging the dominant foothold these three now have,” he said.
ITC was adversely affected last year by the delayed takeover of failed project manager Integrated Tree Cropping.
It raised approximately $10 million through a mix of managed schemes and private forestry arrangements.
Palandri has not disclosed the amount raised, as its capital raising is still open, though industry sources have estimated about $20 million plus.
Two recently announced moves in the industry signal the prospect of continued restructuring.
Barkworth Olives and Origin Olives have announced a 50-50 merger, bringing together the two largest Australian brands – Viva and Gwydir Grove – under one company structure.
The merged company will be up against the two big olive project managers in Timbercorp and Australian Olives.
In the timber sector, Yates has announced plans to sell its forestry management business after raising just $4.1 million last year.
Great Southern is one company poised for expansion, based on last year’s success and its debt-free balance sheet.
“We are extremely well placed to achieve strong growth in our core business activities, and we will also begin to explore diversification opportunities, which may include targeting acquisitions,” Great Southern managing director John Young said.
Great Southern is a specialist timber project manager and any diversification would be akin to changes implemented by Timbercorp, which has added olives and almonds to its core forestry projects over the past few years.
Assessing the sector’s prospects, Mr Kelly noted that start-up projects again found it difficult to gain access to distribution networks last year.
“Any recovery is likely to be slow and the industry in general will only succeed in the long-term if the quality of projects on offer continues the improvement that has been evident over the past 12 months,” he said.
Mr Kelly has predicted a more conservative range of projects this year.
For instance, paulownia tree projects did not fare well and he expects a decline in the number of these projects on offer.
Pricing is likely to be lower, in some cases because investors will receive more land or trees for the same dollar contribution.
Mr Kelly said olive projects, which had been criticised in the past for unduly optimistic yield and sales projections, were becoming “much more realistic”.
