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Following the completion of a review into impediments to secondary markets for trading forestry managed investment scheme interests the Federal Government has moved to allow investors to trade their interests in forestry managed investment schemes after an initial four year holding period. In June 2007 it was announced that legislation to this effect has been passed by both houses of Parliament. This should lead to the development of trading mechanisms later this year and a number of companies are in its infancy to facilitate trade.
This news will be a welcome change for many investors who have been discouraged by the lack of liquidity and length of forestry agribusiness projects – typically between 10 and 25 years. Investors will now no longer need to wait for 10 to 25 years until trees are harvested before recouping their capital. The four-year restriction will apply only to the initial investors in a scheme. The measure will also apply to interests in a pre-existing scheme, meaning that taxpayers who invested in a forestry MIS prior to 1 July 2003 will be able to trade their interests from 1 July 2007.
Secondary market sale proceeds are considered assessable income for the seller. Secondary market buyers will not receive a tax deduction on the purchase price but all project related costs such as management fees or harvest costs are deductible as they are incurred. Buyers will also incur any capital gains tax on net sale or harvest proceeds.
Allowing secondary trading is also expected to boost investments into more lucrative but slower maturing sawlog timber plantations. Previously managed investment schemes have concentrated on fast growing plantations that could be harvested and sold to the export woodchip market after around 10 years. |
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