At a Ministerial Conference in Canberra on Friday, Western Australia will seek a national commitment to a better system of taxation and financial incentives to promote long-term investment in hardwood and softwood plantations for sawlog production.
Forest Products Minister Paul Omodei said that removal of existing taxation inequities should be the first step in a program to encourage long-term investment.
Mr Omodei said that almost without exception the current boom in eucalypt plantings on farmland across Australia was aimed at the production of pulpwood on short (10-year) rotations.
They made little contribution to sawlog supply and were not suited to lower rainfall zones where environmental benefits may be the greatest.
Under the present rules, income tax was paid when immature plantations were sold, but the purchase price paid by the new owner was not a tax deduction until income was earned from the plantation.
This deflated the market value even of short rotation plantations and had a more serious effect on long rotations where the purchase price might be carried for 20 years or more without any indexation for inflation when it finally came to be offset against income.
A sawlog plantation also had to be managed differently from a pulpwood plantation, with much more open stands and strictly timed pruning operations.
Taxation incentives were needed to encourage investment in sawlog plantations over 20 and 30-year rotations.
Direct subsidies or grants should also be considered for establishment of sawlog plantations to maximise their impact on salinity and biodiversity.
WA was now in a position to provide up to 25 million maritime pine seedlings a year for low rainfall areas, but there needed to be enough long-term investment in plantations to ensure sufficient supplies for future processing operations.
Mr Omodei said the Ministerial Council would be asked to support a detailed study of taxation and other incentives to be carried out by the Private Forestry Consultative Committee, Agriculture Fisheries and Forestry Australia, and the Australian Bureau of Agriculture and Resources Economics.
This would be followed by a detailed submission to the Commonwealth Treasury.
“There is widespread belief that hardwood and softwood plantations can become the dominant source of sawlogs for the timber industry, but there must be changes in the economics of the industry if we are to achieve long-term security of supply,” Mr Omodei said.
Media contact: Hugh Ryan 9213 6700