Australasia's home for timber news and information

Tax Bill another kick in the guts for Victorian forestry

Victorian Treasurer Tim Pallas with Premier Jacinta Allan. Mr Pallas is concerned about future timber needs.

A crackdown on multinational tax avoidance is threatening to undermine Victoria’s future timber supply, with the forestry industry set to be slugged millions in new taxes. Source: Herald Sun

The Victorian government’s own pledge to plant an extra 16 million trees in a new estate which will underpin 2000 regional jobs is also at risk.

The blow comes as the state’s native timber industry has just weeks until a logging ban is imposed on 1 January 2024.

The Albanese government Bill that will now come under the microscope of a Senate committee is set to claw back $700 million from 2500 large companies over two years – with secret correspondence obtained by the Herald Sun revealing plantation forestry businesses are facing a $10 million tax hike.

Victorian Treasurer Tim Pallas has pushed the federal government for changes, after raising his concerns that the tax could affect future plantation growth and investments.

In a letter seen by the Herald Sun, Mr Pallas in September wrote that he “applauded” the government’s commitment to making multinational corporations pay.

But he warned that the Bill would impact its $120m Gippsland Plantations Investment Program that will plant 16 million trees and manage more than 14,000ha of softwood plantations.

That investment stands as the single largest investment in new plantation establishment in the state’s history and has been matched by multinational Hancock Victorian Plantations.

Only 4000 of the 16 million trees due to be planted over the next five to 10 years are in the ground.

“Future investment will be needed to meet our future timber needs,” Mr Pallas wrote.

Plantation forests consist of softwood and hardwood tree crops that are grown over decades.

They are used to increase domestic timber supply for housing, as well as contribute to Australia’s net zero emissions by 2050 goal and a global pledge to end deforestation come 2030.

But industry says the proposed tax changes may lead to forests being converted for other agricultural land uses, as well as hinder the expansion of forestry estates and planting of hardwood crops to replace timber sourced from native forestry.

The Bill aims to strengthen rules by reducing the company debt deduction limit.

However, it would have prevented some businesses from claiming any of their forestry plantation debt costs.

The government has recently added two new provisions for forestry establishment and preparation costs – wiping $20 million of revenue from the measure.

But the Australian Forest Products Association acting CEO Natasa Sikman said the amendments still penalised plantation forest owners.

“We need expansion to ensure Australia has an adequate supply of sustainably sourced timber in the future,” Ms Sikman said.

“Plantation expansion is also a key tool in Australia’s fight against climate change, which is why AFPA representatives are at COP28 in Dubai right now arguing the case for forestry to be better recognised as a major solution to reduce emissions.”

Assistant Minister for Treasury, Andrew Leigh, said the proposed changes recognised that some plantation species take up to 50 years to reach harvest age which meant the industry had “unique timelines for investments to start earning”.

“The Australian government expects all businesses to compete on a level playing field, and this involves multinationals paying their fair share of tax to help fund the vital services Australians rely on,” Dr Leigh said.

Federal Opposition forestry spokesman, Senator Jonno Duniam, said: “This badly drafted bill is yet another kick in the guts to forestry workers who are still reeling from Dan Andrews’ devastating decision to ban native forestry”.

“It will put a handbrake on our ability to supply timber to the market meaning more imports from unsustainable countries and less jobs for our regional communities,” Senator Duniam said.

The federal government has committed $73m over four years to a plantation grants program aimed at increasing forest cover on farmland.

Hancock Victoria Plantations was contacted for comment.