Commonwealth and State Forestry Ministers have agreed to study changes to the taxation system and other incentives to promote long-term investment in hardwood and softwood plantations for sawlog production.
The proposal was put to the Forestry Ministers Conference in Canberra today by Western Australia’s Forest Products Minister Paul Omodei, who said removal of existing taxation inequities should be the first step in a program to encourage long-term investment.
Mr Omodei said the conference set a target date of March 31 next year for completion of the study, which would then be used as the foundation for a formal approach to the Commonwealth Treasury.
“I am pleased with the response of my colleagues in the other States and the Commonwealth because we need to take positive action on a national basis to maximise the economic and environmental benefits of long-term plantations,” he said.
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 might 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.
“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