Shares in Great Southern Plantations and Timbercorp took an expected hit today after the Federal Government moved to deny 100 per cent tax deductions for investors in Non-Forestry Managed Investment Schemes.
Shares in Great Southern Plantations and Timbercorp took an expected hit today after the Federal Government moved to deny 100 per cent tax deductions for investors in Non-Forestry Managed Investment Schemes.
Great Southern closed down 13.4 per cent, or 34 cents, at $2.19 after earlier hitting a low of $1.87. Timbercorp shares ended 28.4 per cent lower, or 77 cents, to $1.94 after rebounding from a low of $1.76.
Minister for Revenue Peter Dutton yesterday announced the Government would not consider giving new Non-Forestry MIS the same tax concessions it currently grants to Forestry MIS - that is, the ability to claim upfront deductions for contributions to the schemes, made on the basis that the investor is 'carrying on a business'.
After July 1, investors in forestry MIS will be entitled to an upfront statutory deduction for expenditure, provided that at least 70 per cent of the spending is directly related to developing forestry.
Great Southern managing director John Young said the company was disappointed not to have been consulted on the issue.
"Our first priority now is to seek clarification on the new arrangements and actively engage with the Australian Taxation Office and the Government in an attempt to get the consultation process back on track," he said.
The company, which also invests in grapes, olives and cattle, said its non-forestry projects would continue unaltered, with the changes having no impact on their structure or tax deductibility.
Victoria-based MIS Timbercorp chief executive Robert Hance called on the Government to provide transitional arrangements for agricultural MIS while the Australian Taxation Office prepared a draft taxation ruling to apply to the MIS after June.
"It would be unacceptable to create this sort of damage to the industry in curcumstances where the ATO may be proven wrong. At the very least, Timbercorp will urgently be requesting the ATO to fast track a test case or mediation process to resolve its views," he said.
The full text of Great Southern's announcement is pasted below
On 6 February 2007 the Minister for Revenue, Peter Dutton, announced the Federal Government's position in relation to non-forestry agribusiness managed investment schemes.
The Minister announced that the Australian Taxation Office has reconsidered its interpretation of the current tax laws and, as a result, the ATO is preparing a draft Taxation Ruling which will apply to non-forestry MIS arrangements entered into after 30 June 2007. The effect of this change is that investors will no longer be able to claim upfront deductions for their contributions on the basis that the investor is "carrying on a business".
Great Southern's Managing Director, John Young, said: "We are very disappointed that the Government has failed to consult with industry on this issue, as had been previously promised.
"Our first priority now is to seek clarification on the new arrangements and actively engage with the Australian Taxation Office and the Government in an attempt to get the consultation process back on track.
"Approximately 70% of the company's sales last year came from forestry. Nothing has changed in relation to forestry, and the Government has confirmed that 100% of forestry investments will be tax deductible.
"As a company we now have approximately $1.5 billion funds under management. In excess of $1.3 billion of this - nearly 90% - has come from our forestry projects," Mr Young said.
The 2007 non-forestry projects currently offered by Great Southern will continue unaltered, with the changes having no impact on their structure or tax deductibility.
Yesterday's announcement confirms the Government's commitment to the plantation forestry industry. As Mr Dutton noted in his announcement, this decision will ensure the continued expansion of Australia's plantation forestry estate and lends support to the industry's 2020 vision.
"Great Southern has been built on forestry, we have grown the business aggressively on this basis, and our forestry project will continue as the mainstay of the company's MIS offerings," Mr Young said.
"This month Great Southern will launch a new High Value Timber product focused on the production of teak and mahogany in Northern Australia. This reflects a renewed emphasis on forestry projects and it will leverage our industry-leading forestry expertise.
"Moving forward, we will continue to seek further opportunities within the forestry sector.
"As a company we have faced significant challenges before, including changes to the regulatory regime. In each case we have risen to the challenge and in fact have continued to significantly grow the business year on year for more than a decade, and I am confident that we will continue to do so," Mr Young said.
