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Ralph II affects bluegums

CHANGES to the old tax effective investment prepayment system as a result of Ralph II is the most significant factor affecting the majority of this year’s blue gum projects, says Norgard Clohessy Equity managing director Ken Richards.

The Federal Government’s Ralph II announcements in November 1999 removed the ability to claim tax deductions for prepayments.

For the majority of blue gum projects structured under the old rules, the Ralph II announcements has led to an Australia-wide shortage of blue gum seedlings as promoters struggle to perform work in the current financial year in order to fulfil investors’ expectations of tax deductions.

Mr Richards said NCE’s new projects for 2000 had been structured in light of this.

“Last years’ success stories such as Timbercorp and Great Southern Blue Gum Plantations have doubled up because they have to plant last year’s crop as well as this year’s,” Mr Richards said.

“It’s really slowed them up.

“Our offerings have sold out and finished heavily oversubscribed. We closed early to guarantee work would be done this year.”

Mr Richards said investors in NCE would be able to maximise the immediate tax deductions available to them as well as realise very attractive projected rates of return in the longer term.

“The Australian Blue Gum 2000 Project has been structured under the new rules,” he said.

“However, it was also anticipated that, because of Ralph II, all other blue gum projects, having been based on the old prepayment system, would have to try to fast track soil preparation and planting schedules to deliver promised tax deductions to investors.”

While there has been a shortage of blue gum seedlings, NCE has attained sufficient seedling stocks for 6,000 hectares of plantings.

NCE has been established as a Licensed Securities Dealer for four years.

On 10 February, the company merged with Pacific Forest Limited and listed on the Austra-lian Stock Exchange.

NCE’s portfolio of products for 2000 include Frankland River and Xanadu Wines Vineyard projects, a WA olive project and Australian Blue Gums 2000.

The Frankland River and Xanadu Wines Vineyard projects were fully subscribed.

The Australian Blue Gum 2000 project recently closed and current projects include Olea Australis and another vineyard project in Margaret River.

Mr Richards said a big change in the marketplace was the emergence of the sophisticated investor.

“People want a tax effective advantage but they also want a decent investment,” he said.

“If you invest $5,000 in a product ruling, you get half your money back and your risk goes down through tax.

“Even so, you’ve still got the other half of your money in an investment, so it has to be viable.

“The current quality of projects is infinitely better than those available five years ago.”

Mr Richards said the most attractive investments had value-added aspects.

“With blue gum projects, there are minimum standards for land but they differ greatly,” he said.

“We have an independent forester who signs off the land, so there are safeguards.

“Under the Olea Australis project, we have a ten year agreement to process and sell the oil.

“Investors also get shares in a landowning company that will list on the ASX.

“This is the second level of investment that astute investors are looking for. The new style is to have a stake in the value-added side of the project.”

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