STT’s Accounting Illusion: A response

Tasmania’s debate about native forest logging has always been shaped by numbers—profit figures, asset valuations, operating cash flows, and claims about economic contribution. But numbers only illuminate the truth when the accounting model behind them reflects reality. When the model is flawed, the debate becomes distorted before it even begins.

My  recent Talking Point article argued that the accounting framework used by Sustainable Timber Tasmania (STT) does not reflect the true economics of a perpetual native forest estate. The CEO’s response (pasted below) published in The Mercury on 28^th July 2026 was welcome and constructive, but it did not address the structural issues at the heart of the matter. What follows is a fuller explanation of why the public is still not being given an honest picture of the financial sustainability of native forest logging.

The CEO argued that STT’s profit is not merely a “paper profit,” pointing to the organisation’s underlying profit of $0.8 million and positive operating cash flow. But this misses the central point. STT’s operating cash flow is only positive because the valuation model excludes the two largest unavoidable costs of a perpetual native forest: regeneration and roading. Under AASB 141, the standing timber is valued as if it were a single‑rotation horticultural crop, meaning regeneration, long‑term ecosystem maintenance, road networks and fire protection are omitted from the net harvest proceeds used to value the timber. When these essential costs are excluded from the valuation, they are also excluded from the revenue calculation that drives operating cash flow. The result is inevitable: the biological asset is overstated, the revaluation increment dominates reported profit—adding $7.5 million to STT’s bottom line in 2024–25—and operating cash flow appears positive even though the full cost of maintaining the forest is not being met.

The CEO’s response did not address this structural distortion. It simply pointed to the profit figures produced by the distorted model.

He emphasised that STT’s valuation is independently assessed and audited. That is correct. But compliance with AASB 141 does not mean the valuation reflects the economics of a perpetual native forest estate. The standard was designed for agricultural crops, not ecosystems that require decades of investment and maintenance. The defence that STT is “following the rules” is true but irrelevant. The question is whether the rules produce meaningful information for public decision‑making. In this case, they do not.

The CEO also stated that STT does not ignore the broader costs of managing the forest, noting that regeneration, roading, fire protection and other expenses appear “in the financial statements.” That is true in the narrow, technical sense—these costs show up somewhere in the accounts. But this is where the wording becomes careful. The issue is not whether the costs appear in the financial statements; the issue is where they appear, and where they do not. These costs are not included in the valuation of the biological asset, which is the figure driving the reported profit. The valuation model assumes a single rotation and excludes long‑term costs. Some—but not all—costs are included in operating expenditure and operating cash flow, but that does not correct the valuation distortion; it simply means STT incurs costs that the valuation model pretends do not exist. This is precisely why the biological asset is overstated and why the revaluation increment is misleading as a measure of economic performance.

The CEO argued that STT is not a rent‑free operator because it is a government business enterprise managing public land. But this reframes the issue without addressing it. STT does not pay rent, lease fees, or royalties that reflect the economic value of the land or the timber. A private operator would have to buy or lease land, pay holding costs, and pay for the timber resource. STT pays none of these because the public provides the land, the timber, and the carrying cost. Calling STT a government business enterprise does not change the economic reality: the absence of an imputed land cost is a subsidy. And under National Competition Policy, government‑owned businesses are required to avoid using hidden subsidies to undercut private operators — a requirement that makes the rent‑free access issue even more significant. The CEO’s response does not contest this—it simply describes STT’s statutory role.

He also highlighted that STT has paid $30 million in dividends to the State over the past decade, implying they resulted from profitable operations. But the largest of those payments did not come from logging. In 2017, STT received $60 million from the sale of a Forestry Right over 30,000 hectares of hardwood plantations, most of them growing on Crown land. A Forestry Right of this kind typically grants the purchaser control of the timber and rent‑free access to the land for 99 years. As any actuary will tell you, a 99‑year rent‑free interest is economically indistinguishable from acquiring the land itself. The land component of such a right has substantial value—likely around half of the $60 million sale price.

In other words, roughly $30 million of the proceeds represented the value of Crown land. STT did not own that land. And the subsequent $30 million dividend paid to the State was not the product of profitable operations. It was simply the return of the Crown’s own capital. This transaction directly contradicts the CEO’s claim that STT should not be considered a rent‑free operator. If rent‑free access is irrelevant, why did the land component of the Forestry Right sale generate tens of millions of dollars? Why did STT’s largest dividend come from selling rights over land it never owned?

It is important to be clear about what the $60 million Forestry Right sale actually represented. Roughly half of the proceeds reflected an interest in land—Crown land that STT did not own—and the other half reflected the value of hardwood plantations that were themselves either directly funded by Commonwealth grants or heavily subsidised through MIS schemes that defaulted to STT when Gunns collapsed. After the State received its $30 million dividend, effectively reimbursing the Crown for the land component, the remaining $30 million has been drawn down gradually to support STT’s cash flow. This matters because STT presents its operations as cash‑positive, but that appearance only holds because regeneration and roading costs are excluded from the valuation model and therefore from operating cash flow. Once those unavoidable costs are included, native forest operations are cash‑negative, and the residual plantation‑sale funds have been quietly used to fill the gap. In short, the $30 million was not surplus generated by profitable logging; it was capital realised from selling Crown land rights and subsidised plantations, now being consumed to sustain an activity that does not pay for itself.

So while the CEO is technically correct that STT “paid an ordinary dividend” and has “eight consecutive profitable results,” the dividend was funded by selling Crown land and taxpayer‑funded plantations, and the profits only exist because regeneration and roading costs were excluded and quietly covered by the residual sale proceeds STT kept after reimbursing the State.

The CEO argued that the $12 million annual government payment is not a subsidy but a community service obligation. The label is correct. But the economic effect is the same: the public is funding essential land management that STT cannot cover from its own operations. If native forest logging were financially self‑sustaining, STT would not require annual government funding to maintain the estate. The CEO’s argument that the state would need to fund these services even if logging ceased is correct—and it reinforces the point that logging does not generate enough revenue to cover the costs of managing the land it depends on.

He also noted that STT contributes to regional economies and local businesses. That is true. Logging activity generates economic transactions—contractors, truck drivers, sawmills, and downstream processors all benefit from the flow of logs. But this does not answer the question of whether logging itself is financially viable once full costs and opportunity costs are included. Economic activity is not the same as economic surplus. Loss‑making industries can generate substantial local activity while still imposing net costs on the public. The CEO’s response conflates gross activity with net value.

There is another omission worth noting. The Chair of STT is also a director of the Forestry Corporation of NSW. STT’s new CEO previously worked for FCNSW. That organisation has taken a very different approach to the valuation of native forests: it has fully impaired its native forest estate. Full impairment means the timber value of those forests is effectively zero. It signals that future native forest operations are expected to be loss‑making and that the biological asset cannot be justified on economic grounds. FCNSW can absorb this because it has a large, profitable softwood plantation division. Tasmania does not.

If the Chair of STT accepts—in his role at FCNSW—that native forest logging is not financially sustainable in NSW, it is reasonable to ask why the same logic does not apply in Tasmania. The CEO’s response did not address this. Yet the NSW impairment is one of the clearest signals available that native forest logging, when valued honestly and on a full‑cost basis, does not generate economic returns.

The CEO’s response was detailed, but it did not engage with the central issue: native forests are not a crop, and valuing them as one produces distorted accounts and distorted public debate. Ending native forest logging would not create a budget windfall. It would simply stop the losses from the logging itself and eliminate the unpriced environmental costs that never appear in STT’s accounts. But it would not eliminate the need to manage 821,000 hectares of public land. The fiscal benefit is real, but it is not the windfall some imagine. It is the avoidance of ongoing losses, not a new source of cash.

The real question remains unchanged: Is the public receiving net value from native forest logging, or simply carrying its costs?

Until the valuation model reflects the true economics of a perpetual forest ecosystem—including land value, regeneration, roading, long‑term maintenance, and opportunity cost—Tasmania cannot answer that question honestly.

 

TASMANIA’S NATIVE FORESTRY DOES DELIVER SUBSTANTIAL ECONOMIC, ENVIRONMENTAL AND COMMUNITY BENEFITS

WHILE THE INDUSTRY MUST REMAIN TRANSPARENT AND ENVIRONMENTALLY ACCOUNTABLE, EVIDENCE SHOWS IT IS NOT A BURDEN, WRITES DEAN KEARNEY

John Lawrence raises an important question about how Tasmania measures the full value of its public production forests. That discussion should consider not only accounting treatments and hypothetical land costs, but also the broader economic, environmental and community benefits delivered through the responsible management of our forests.

The claim that Sustainable Timber Tasmania’s published financial profit is merely a “paper profit” overlooks the figures designed to show how the underlying business is actually performing.

In 2024-25, STT recorded a $7.5m increase in the value of its biological assets. It also separately reported an underlying net profit of $0.8m, defined as operating revenue less operating expenditure and positive operating cash flow of $1.8m. It paid an ordinary dividend to the state and has now recorded eight consecutive profitable results.

Since 2017, STT has paid $30m to the state in dividends and made contributions to on-island processing funds to help the local sawmilling sector modernise its equipment.

Importantly, STT’s accounts are prepared under Australian Accounting Standards, including the standard applying to biological assets. The forest valuation is undertaken by an independent specialist and examined by Audit Tasmania, which concluded that the 2024-25 accounts presented a true and fair view of STT’s financial performance, position and cash flows.

STT is happy to acknowledge that such accounting standards do not capture every social and environmental value provided by Tasmania’s forests and it is reasonable to debate the limitations of the accounting process. However, STT is not using a valuation method of its own invention. We are applying the accounting rules required for biological assets, which measure the value of the standing timber, which are not designed to measure every economic, environmental and community benefit.

That distinction is important because valuing the standing timber separately does not mean the broader costs of managing the forest are ignored. STT’s financial statements include contractor and freight costs, property management, local government rates, road depreciation, forest re-establishment, and fire prevention and suppression.

For example, whilst reporting a financial profit last financial year, STT also carried out maintenance on 3040km of existing roads, constructed 24km of new roads, conducted works on 5566ha of forest, sowed 100 million locally sourced seeds and achieved a 99.5 per cent regeneration success rate across the areas assessed. STT also planted about half a million seedlings in restocking timber plantations that had been previously harvested.

The characterisation of STT as having “rent-free” access is similarly incomplete. STT is not a private company handed free land to exploit. It is a government business enterprise established under legislation to manage Permanent Timber Production Zone land for multiple users, while supporting economic growth and employment and supplying agreed volumes of timber.

It manages a forest-road network of more than 10,000km, providing access for communities, tourism, beekeepers, hunters, fishers, emergency services and other land managers. It also manages hundreds of leases, licences and easements, supports apiary sites, undertakes conservation, research programs, biodiversity outcomes, carbon storage and provides a trained statewide firefighting capability with about 16 per cent of PTPZ, around 129,000ha, being managed purely for conservation.

The $12m STT receives from government is transparently identified as payment for community service obligations: keeping public production land managed and accessible, undertaking fuel-reduction work, supporting fire prevention and detection, and helping suppress fires on non-production forests and adjoining land. That is not a concealed subsidy to log sales. It is payment for public services the state would still need to allocate should timber harvesting end.

The wider economic contribution of STT’s forestry activities also matters.

 During 2024-25, STT paid $109m to 544 Tasmanian businesses, with 87 per cent of its purchases made locally. About $45m went to harvesting and haulage contractors.

More than 1.2 million tonnes of forest products were harvested and transported for Tasmanian processing, including high[1]quality eucalypt sawlogs and special-species timbers. Those figures represent regional Tasmanian businesses – including contractors, truck drivers, sawmill workers, engineers, mechanics, furniture makers, builders and other small businesses.

Most importantly, value creation does not stop when a log leaves the forest, that is only the beginning. Once delivered, the value of the log and the number of people employed continues to grow as it moves through local processing, manufacturing, construction, retail spending, wages and household incomes.

 None of this means native forestry should be beyond scrutiny. STT must keep improving efficiency, transparency, forest practices and environmental outcomes. It must account for carbon, biodiversity, cultural values, water, recreation and future generations, while meeting supply commitments and maintaining financial discipline.

The evidence suggests Tasmania is not carrying a cost burden from public production forestry.

Through employment, processing, public land management, fire protection, regional investment, community access and dividend returns to the state, Tasmania is receiving substantial value from its forest industry.

Dean Kearney is the chief executive of Sustainable Timber Tasmania