Tree plantation rip offs

When tax incentives produce scams

When the federal government under John Howard decided to give tree plantation investors a tax break, they weren't doing them any favours.

While the ability to reduce tax is good news, plantation investors still need to stump up a good deal of their own cash to buy into tree plantation schemes.

Will they ever see their money again?

The problem with tax schemes is that they tend to stampede investors into particular financial arrangements because, for many people, tax effectiveness is an important part of investment and tax treatments lend schemes an artificial credibility...supported by the government...must be OK.

Unfortunately some operators clearly see these schemes as opportunities to take advantage of distant 'investors'.

Welcome to Gunns Ltd, Tasmania's biggest and most rapacious timber giant.

Gunns receives huge subsidies from government and puts enough back into party pockets to earn the simpering loyalty of major political party chiefs. That's the first cash merry go round.

Gunns has been clearing Tasmania's precious native forests for decades, converting beautiful and unique timbers into woodchips for sale on the world market. As native forests have been cleared, remaining forests are progressively harder to access and environmental objections have been more of a nuisance to Gunns. So began the shift to plantation timbers for wood chips.

The Howard government, keen to buy the votes of marginal Tasmanian seats, pandered to logging interests whom they believed controlled the vote.

Gunns, always ready for another handout, shifted focus into plantations to take advantage of federal MIS schemes which pay them significantly more than their costs to develop plantations.

With the amount of profit they make from each investor, they are able to buy more land for tree plantations. This process is rapidly converting Australia's farmlands into trees.

It is now clear that Gunns makes its money from two major sources - taxpayers and plantation investors.

If you've invested in a Gunns plantation, you should check your contract and your financial position carefully!

Risks that you should act upon

Gunns tree plantations

The real risks

If you're thinking of investing in trees in Tasmania, then there are some vital facts that you need to know first.

The first is that the person recommending that you 'invest' in tree plantations, is going to be getting paid a healthy commission of 10% - 15% of your money.

At Gunns usual rates for a hectare, you'll need to get $35 - $47 tonne for your trees (150 - 200 tonnes/hectare/15 years) just to break even in today's dollars!

In its 20 year wood supply contract with Gunns, the State government has just reset the price per tonne (i.e. floor price) for public pulpable hardwood at $16 tonne delivered to Gunns mill.

For those plantation investors for whom Gunns is their only possible customer, they will have no choice but to sell trees at whatever price Gunns offers - which is likely to be around $16 tonne delivered!

That's a loss of between $25 to $35/tonne or around $5,ooo per hectare for local investors. Those with 100 ha of plantation are in for an extremely nasty shock as is anyone relying on notional income from plantations in a decade or so.

The tax incentives to grow tree plantations are little more than a taxpayer subsidy to Gunns, who take no risks, get all cash up front and have the taxpayer/investor pay for the growth of trees that they need for their pulp mill.

Why haven't I heard this before?

Just about all printed and verbal information about tree plantations comes from people who rely on getting your money. Your financial advisor, the plantation company, both are paid by YOU. If you don't purchase a tree plantation, they make nothing.

They are not going to tell you the risks.

We're different

We are independent of the industry and free to report the facts as we see them.

What to do

Find out your situation - DO NOT MISS THIS STEP

• How much have you got invested in trees?
• Do you have any guarantee of the price you'll get for them?
• What happens if the price is much lower than you have been led to believe?
• What guarantees are there for your future income from your plantation(s)?
• Can you sell your plantation if you want to? When? How?

Demand action from your federal MP

If you cannot get satisfactory answers to these questions, contact your federal MP. It's federal MIS tax subsidies that are stimulating the tree plantation business.

Trade Practices Action

If you feel you've been misled by the plantation company in any way, you can lodge a complaint with the ACCC Trade Practices Commission, whose Act forbids misleading or false advertising on pain of financial penalties.

You can also join a group of people who want to take similar action to decrease your workload and increase your chances of success.