One of your correspondents in a note titled
“Does Gunns pay rates” again raised the question whether plantation growers pay
their fair share of municipal rates.
The answer in short, is they are accorded
special treatment with respect to their assessed level of rates. But it is in
the matter of land tax where the State Government has been seriously remiss.
Many of the failed and failing MIS schemes are arguably not entitled to land
tax exemption which has always been granted in the past.
The Valuation of Land Act 2001 defines land in
Section 3 to include plantations and all trees and timber on land.
However Section 11 which outlines the approach
to valuations by the Valuer General specifically excludes tree plantations from
both land value and capital value (capital value is the sum of land value plus
the value of improvements such as buildings, structures and virtually
everything attached to the land except items of plant).
Section 11(7) reads as follows.
For the purposes of this Act, in the
assessment of the land value, the capital value and the assessed annual value
of land used primarily and effectively for growing trees to be cut for
commercial or industrial uses, use as firewood excepted, and of an area –
(a) in the case of indigenous trees not in
an artificially established plantation, of not less than 10 hectares; and
(b) in the case of an artificially
established plantation, whether indigenous or foreign trees (including a
plantation artificially established and naturally regenerated), of not less
than one hectare –
the value of the trees growing on the land
is not to be included
(my emphasis).
Fruit growers have their trees included in the
value of their land and pay municipal rates accordingly, but not plantation
growers. The latter have, in a lot of cases, removed unwanted houses and other
capital improvements thereby reducing the capital value of their properties,
and replaced them with plantation trees which are specifically excluded.
There are also the negative externalities
produced by forest plantation companies by way of extra use of scarce water
resources and extra wear and tear on country roads. And they are given a
discount on their rates. It’s a crazy world. Little wonder they kept lining up
to buy more of our land.
Compare this, for instance to the situation of
a dairy farmer whose assets predominantly consist of land and improvements.
(a)the unimproved land is included in land
value.
(b) land improvements such as drainage and
land leveling are included in the land value.
(c) improved pastures are included in the land
value.
(d)dams and irrigation schemes are included in
the capital value.
(e) dairies especially the modern rotary
dairies are essentially items of plant and shouldn’t be included in capital
value but often are still treated as structures and included in capital value.
Notwithstanding that a tax deduction may have
been obtained for all the above improvements, they are nevertheless included in
any value for rates purposes. Unlike plantation trees.
But trees are only a crop, I hear Barry and
Terry saying, and crops aren’t included in the value of a property. Not quite
right. A dairy farmer’s pasture is simply a crop of, say, perennial ryegrass
and it is included.
What about fruit trees? Fruit trees are
regarded by our law (based on olde English case law) as simply the capital
structures which produce a crop of fruit. The trees themselves are not a crop,
the fruit is. Accordingly the trees being attached to the land are included in
the capital value of the land and so extra rates need to be paid.
The Land Tax Act 2000 covers land tax. An
exemption is granted to primary production land.
Section 7 covers primary production land.
(1) Land is primary production land if it
is –
(a) used substantially for the business of
primary production; or
(b) declared a private timber reserve under
the Forest Practices Act 1985; or
(c) a State forest under the Forestry Act
1920; or
(d) land in respect of which there is in
effect a certified forest practices plan, being a plan certified by the Forest
Practices Authority under section 19 of the Forest Practices Act 1985 in
accordance with the State Permanent Forest Estate Policy.
(2) The business of primary production
means any one or more of the following carried out in a business-like manner
with a reasonable expectation of profit:
(a) cultivating land to sell the produce of
the cultivation;
(b) maintaining animals or poultry for sale
or selling their natural increase or bodily produce;
(c) keeping bees to sell their honey;
(d) commercial fishing and cultivating
aquatic plants or animals, including the preparation for fishing and the
storage and preservation of fish and fishing gear;
(e) cultivating or propagating for sale
plants, seedlings, mushrooms or orchids.
Subsection (2) above requires there to be a
reasonable expectation of profit for a business of primary production to exist.
For most MIS schemes it is virtually impossible to argue that there is a
reasonable expectation of profit so therefore a business of primary production
as defined in the Land Tax Act 2000 cannot exist.
In the case of Great Southern (GSL), for
instance, there is evidence on the public record of actual and predicted tree
crop yields for 10 years’ crops and none will be profitable (although the first
3 Projects were propped up Charlie Ponzi style to appease the initial investors
and attract new investors).
Therefore for a land tax exemption to apply,
one of the other conditions in Subsection (1) needs to exist. And in most cases
creating a Private Timber Reserve (PTR) will do the trick. So long as it’s got
PTR status a business of primary production needn’t be carried out. A land tax
exemption will apply regardless.
GSL’s Temma property has attracted much
comment recently, not because it’s the only failed MIS scheme (there are many),
but because it’s a good example of the genre. Even GSL’s Independent Forester
confirmed 2 months ago that Temma “had significant areas of limited growth and
plant failure, particularly in the low lying country. ……… approximately 36
hectares of this area will not be replanted. (How much will be replanted?).
Horses and cattle were present within the plantation and had caused some tree
damage”.
David Llewellyn has been provided with all the
evidence that a business of primary production is not being conducted either
for income tax purposes or land tax purposes. He was specifically asked in the
House on 24th September 2008 about Temma and the proposed PTR application. He
said he would investigate. A classic filibuster. He simply gave GSL time to
process their PTR application to assist GSL avoid a possible land tax
assessment. The government value of the Temma property (land only) is $5.29m.
The land tax payable would have been $123,337.50.
It is understood that Mr. Llewellyn has also
failed to report to the ATO possible breaches of Federal income tax
requirements.
So not only have the Feds subsidised the
establishment of trees at Temma to the tune of $3m, the State government is now
allowing a land tax exemption to the tune of $123,337.50 pa.
Mr. Llewellyn if you have any doubts re the
above, the following is an extract from the State Revenue Office website.
The following criteria must be met if the land
is to qualify under this part of the definition of Primary Production Land
• The land must be used substantially for the
business of primary production; and
• The business of primary production must be
carried out in a business-like manner; and
• The business of primary production must be
carried out with a reasonable expectation of profit.
Every single one of GSL projects from 1998 to
2003 that GSL is currently attempting to buy back from investors will fail to
provide the investors with a profit. Mr Llewellyn is now allowing PTRs to help
MIS companies avoid their tax responsibilities.
Aren’t they tax terrorists? Might have to
refer that question to Bryan Green. He seems to be the current guardian of
ethical behaviour.
The paucity of responses from the major
parties whilst witnessing the decline of private forestry in this State is
breathtaking. The State Government’s tacit support for MIS companies to exploit
the loophole in the Land Tax Act by opting for PTRs is unlikely to endear
increasingly disenchanted voters to the Government’s cause. Not to mention the
special rates treatment given to MIS companies compared to other farmers.
Time to step up to the plate Mr Bartlett. I’ve
a feeling it’s going to be a big year for you.
No comments:
Post a Comment