Julia said:You are absolutely right about the effect on GT P's SP if there is even a hint of any change in the tax status of the MIS concessions. I guess we will be holding our breath somewhat until we know the outcome.
This is the main reason I will eventually liquidate all my GTP shares. I'm just not comfortable with the vulnerability of the company - excellent though it undoubtedly is - to negative suggestions on the tax concessions.
Julia
abucs said:Sell out now 'Out to Soon' !!!
Make us all happy.
savtin said:Julia,
it was meant to be a joke .....go back and look at what was said by the referenced post....he said if i sell then likely events would be that GTP will skyrocket.........hence abucs told him to sell................so the SP will go through the roof....
cheers
savtin
Julia said:Well, what a dope I am. That will teach me to not read through the preceding posts before jumping in! Sorry for being so dumb.
Seriously, it really is disappointing that none of GTP's rallies appear able to be sustained
Julia
From Macquarie:
Great Southern Plantations
Tax Speculation
--------------------------------------------------------------------------------
Stock: GTP AU
Volatility Index: very high
There is speculation that the 12 month prepayment rule will be relaxed. The 12 month rule is currently due to expire in June 2008. The industry is currently being reviewed by Treasury with recommendations due soon.
Impact
The 12 month prepayment rule allows forestry Managed Investment Scheme companies to accept investments up to 30 June each year and gives them 12 months to implement the scheme, that is, plant the trees.
It is business as usual for Great Southern until at least the end of 2008. Even assuming that the 12 month rule expires for 2009, the worst case, Great Southern will have 9,300 hectors of second rotation, capital expenditure free, land available for resale on which a 30 June sales cut-off could be imposed with 100% deductibility for the grower. This rises to 19,700 hectors in 2010. It is important to note that the 12 month rule does not apply to wine and other schemes which are estimated to be 24% of Great Southern's 2006 sales.
Price catalyst
12-month price target: $4.10.
Catalyst: Improvement in free cash flow generation driven by land recycling, product restructuring and increased securitisation. Any tangible evidence that 2006 sales volumes are likely to be maintained at or above 2005 levels will be a major catalyst.
Action and recommendation
We have retained our outperform recommendation. Great Southern is likely to remain a volatile stock given the concentration of sales in the month of June each year and the impact of factors outside the company's control. However, we remain confident of a valuation in excess of $3.50 per share under most likely sales scenarios.
Terms of reference of the Treasury review:
The commercial viability and current tax treatment of plantation investment;
Whether the operation of the Income Tax Assessment Acts impedes investment in longer-term forest rotations which produce higher value products;
The role of State and Territory Governments in plantation industry development as investors, growers and land managers, and any implication this has for competitive neutrality with regard to tax liabilities and incentives;
The capacity to adapt existing tax policies to contribute to achieving the Australian and State Governments' desire to achieve a greater integration of plantation and natural resource management policies to improve the management of salinity and water quality; and
The relative roles and effectiveness of tax system and expenditure programmes in the delivery of assistance to the industry.
savtin said:This was also announceed today:
Plantation group urges tax concessions clarification
One of the state's biggest plantation groups is calling on the Federal Government to clarify its stand on tax concessions that encourage investment in the plantation timber industry.
The former federal minister for forests, Wilson Tuckey, warned yesterday that Treasury is looking at ways to adjust a scheme that allows investors in the industry to claim tax deductions.
But Great Southern Plantations' spokesman David Ikin says the industry has been told the Government is thinking of extending the concessions and may make them permanent.
He says the Government needs to assure the industry the arrangement will be upheld.
"If there is any doubt we'd like to see it clarified. At the moment we've got a situation where they've announced this 12 month rule as it's called will go through until 2008, so we're very confident that's the case," he said.
SE News
HD Axe hangs over tax schemes
BY John Breusch
WC 775 words
PD 5 April 2006
SN Australian Financial Review
SC AFNR
ED First
PG 1
LA English
CY © 2006 Copyright John Fairfax Holdings Limited. www.afr.com Not available for re-distribution.
LP The timber plantation industry is bracing for possible changes to its tax treatment in next month's federal budget.
Treasury is concerned about the generosity of a scheme that has underpinned the sector's $1.3 billion resurgence over the past two years.
TD The government is examining the future of the so-called 12-month prepayment rule, which allows investors to claim a 100 per cent deduction for money they give to managed investment schemes (MIS), which use the funds to establish the plantations.
While Treasury is understood to be considering reducing the tax-deductible amount, Forestry Minister Eric Abetz is pushing for full retention of the scheme.
"It is vital if we are to grow our plantation sector," Senator Abetz said.
The recent growth in MIS plantations, fuelled by $765 million in investments last year and more than $500 million in 2004, has caused tension in many rural communities.
Farmers are complaining they are unable to compete for land with schemes that are propped up by generous tax breaks.
But Senator Abetz has rejected the claims, saying plantations create jobs in the bush, provide a foundation for the growing wood-processing sector and take pressure off native forests.
"It's market driven. Some of the less-productive farmland is found to be more productive and returning money to the owners of the land if they grow trees on it," he said.
Alan Cummine, executive director of industry group Treefarm Investment Managers Australia, said he was confident the government had no interest in damaging the industry as it recognised the role that MIS schemes played as a long-term source of wood for the domestic market and export processing plants.
"It is unlikely to meddle with the tax system in a way that would threaten this resource and the regional industries and communities that depend on it," he said.
The MIS industry wants the government to not only extend the 12-month rule beyond its July 2008 expiry date but to overturn legislation that disallows deductions when investors sell their stakes before long-rotation trees are fully harvested.
There is concern that without the capacity to on-sell into a secondary market, investors will be discouraged from putting money into long-rotation plantations - especially hardwoods - which can take up to 25 years to reach maturity.
As part of a review of the MIS schemes, Treasury has been working with the Department of Agriculture, Fisheries and Forestry to put recommendations to the government. The issue is set to be discussed on April 11 by the government's ad hoc revenue committee, which considers tax options ahead of the May budget.
The deliberations come as many taxpayers look to invest in plantation schemes ahead of the end of the financial year.
Adviser Edge analyst Shane Kelly said the removal of the 12-month rule would have significant consequences for the industry.
"What you would find if they took it away is that companies would have to adopt a much more conservative land-acquisition program," he said.
But he said the sector's diversification away from forestry and into such horticulture crops as almonds, walnuts and olives meant MIS companies were better prepared for any changes.
While Timbercorp would feel almost no impact, companies such as Great Southern Plantations would be more vulnerable.
Investment in the MIS sector plummeted from $680 million in 1999-2000 to just $190 million in 2001-02 after the government removed the previous version of the prepayment rule, before recovering to $765 million last year after the introduction of the 12-month rule.
The sector also ran into trouble about five years ago amid a Tax Office crackdown on uncommercial schemes.
In its submission to Treasury's review, global food giant McCain questioned whether the MIS plantation industry was viable only because of its tax breaks.
"Historically the plantation industry and in particular the blue gums have received significant tax advantages, allowing such companies to pay above market prices for resources such as land, which in turn discriminates against other land users such as broadacre agriculture and horticulture," the submission said.
The issue has drawn attention to a debate about the merits of Plantation 2020 Vision, the federal government's forestry blueprint, which provides an important justification for the 12-month rule.
Liberal senator Bill Heffernan has repeatedly raised concerns that the high water demands of plantation forests mean the 2020 policy is inconsistent with plans to improve river flows in the Murray Darling basin. "Everyone should be concerned about the lack of environmental planning," he said.
IN
i02 : Forestry/Logging | i0 : Agriculture/Forestry
NS
ccptax : Corporate Taxation | c13 : Regulation/Government Policy | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter
RE
austr : Australia | ausnz : Australia and New Zealand
PUB
F2 Australia & New Zealand Limited
AN
Document AFNR000020060404e2450002v
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