Dr WASHER (9:59 AM) —The introduction of the Taxation Laws Amendment Bill (No. 1) 2002 so early in the new parliament clearly demonstrates the federal government's strong commitment to its national plantation strategy, as outlined in Plantations for Australia: the 2020 Vision, and recognises the significant role the private sector plays in expanding Australia's plantation estate. There is certainly, as my friend from Eden-Monaro said, an urgency in the passage of this bill.

The proposed changes highlight the importance this government places on meeting its key election commitments, by promoting certainty and improving investor confidence in Australia's plantation forestry sector. The key measure to stimulate investment in forestry plantation—the introduction of a 12-month rule for certain prepaid expenditure—meets major industry concerns and was a key election commitment for the government's third-term forestry agenda.

The federal government has moved swiftly and decisively to help the embattled plantation investment management sector by reinstating a significant tax concession that will allow investors in forestry wood lots to claim deductions up to a year in advance of the funds being spent by managers. This amendment to the taxation laws relating to forestry investment overturns one of the reforms to business taxation which flowed from the Ralph report and had the adverse effect of severely curtailing activity in plantation forestry managed investments. While the Australian Taxation Office was seeking to crack down on abusive tax driven investment schemes, legitimate forestry managed investments were swept up by the same broom, dealing a serious blow to the industry and jeopardising the implementation of the government's vision for forestry.

This bill reflects the government's concern about the severe slowdown in growth in the plantation investment sector, particularly in the wake of last year's collapse of Australian Plantation Timber Ltd. The abolition of the so-called 13-month rule in November 1999 left plantation managers in a position where they had to own the land and have most of the plantation work completed in the financial year that the investor claimed the deduction. That created cash flow pressures for the plantation managers, who had to use guesswork to estimate the level of sales they would achieve in the run-up to 30 June when buying land and seedlings in the months prior.

The new rule will allow investors to receive tax deductions for investments and projects up to 30 June each fiscal year, before the plantations are established in the ensuing 12 months. This measure will create a favourable environment for the private investor and is necessary to develop a significant plantation resource, which will enhance the growth in Australia's forest industries and the contribution made by the plantations to the Australian economy and to rural communities and regional development.

The other main measure contained in the bill amends the non-commercial losses rules, specifically the commissioner's discretion. Previously, the commissioner could not exercise his discretion past a point in time at which a profit was made or one of the tests was passed, even if the profit was made or the test was passed on a one-off basis during that time. The amendments will allow the commissioner's discretion to be exercised for all relevant years where this is consistent with the nature of the business activity. This is particularly relevant in the plantation forestry sector, where normal practices such as thinning may produce a one-off profit or passing of a test.

Achievement of the 2020 vision will have many benefits. By the year 2020, more than $3 billion will be invested to establish new plantations, and this will be mainly from private capital investment. The current $2 billion trade deficit in wood and wood products will be converted into a surplus. Up to 40,000 jobs will be created in rural areas, revitalising rural communities and regenerating their economies.

The Commonwealth government's role in the national strategy for plantations is primarily one of leadership and providing clear and consistent policies supporting plantation development. This bill does just that. The new arrangements will promote forestry as a sound investment and will help to provide a strong and internationally competitive plantation industry. With financial assistance from the Farm Forestry Program and Plantations for Australia: the 2020 Vision, together with active involvement of both the Australian Securities and Investment Commission and the ATO, the sector has almost completed preparation of a new code of practice for afforestation investment companies and an accompanying investors guide to afforestation investment, to be issued under the Australian Forest Growers' banner. I certainly hope this code and guide will address issues raised in the Senate inquiry into mass marketed tax effective schemes and investor protection, which were so obviously neglected, particularly in Western Australia, before the advent of product ruling.

In the past few years, the plantation managed investment sector has brought about the investment of hundreds of millions of dollars in land acquisition, plantation establishment and seasonal and permanent employment in rural Australia. Long-term contracts have been negotiated, and are being negotiated, for the marketing of their harvests. Companies are also exploring prospects for investment in domestic pulp mills and other value-adding industries in the main plantation regions. The member for Werriwa must take this into consideration when applying sunset clauses, because these pulp mills are a massive cost. These companies would like a situation whereby they can purchase or lease land after the sale of wood lots are known, rather than creating financial difficulties by gambling on the amount required beforehand.

Finally, this bill will restore confidence and stability after a shocking year in which the major player, APT, went to the wall and investors shunned the forestry sector in the wake of the ATO crackdown on unrelated schemes. I would like to emphasise that the tax commissioner, Michael Carmody, has since clarified that there is no cloud over the tax position of reputable plantation companies with valid tax office product ruling. They are quite distinct from the mass marketed tax abusive schemes that the ATO has taken action against. I commend the bill to the House.