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Wednesday, 21 August 2002
Page: 3522

Senator Brown asked the Minister for Revenue and Assistant Treasurer, upon notice, on 15 April 2002:

With reference to the revenue impact of the forestry prepayments under Taxation Laws Amendment Bill (No. 1) 2002:

(1) Is it correct, as stated in the explanatory memorandum to the bill, that industry and independent estimates place the presence or absence of the prepayment rule at 50 000 to 60 000 hectares per annum.

(2) Is it correct, as stated in the explanatory memorandum to the bill, that the cost to revenue resulting from the prepayment measure is estimated to be $25 million in 2002-2003, $5 million in 2003-2004, nil in 2004-2005 and $25 million in 2005-2006 and each year thereafter.

(3) In assessing the cost to revenue of the measure what did the Minister assume to be the tax deductible costs over the life of the plantation.

(4) Using the figures in parts (1), (2) and (3), what is the cost of the measure in each of the next five years assuming: (a) a marginal tax rate of 37 per cent; and (b) a marginal tax rate of 50 per cent.

(5) With reference to the response provided to questions raised by Senator Murphy by Julia Neville from the Ministers office, dated 21 March 2002: (a) what is included in the entire amount of investment in the forestry industry (estimated at $560 to $700 million per annum); and (b) why does it differ from the actual investment in forestry plantations in 2000-01 (stated to be $200 million).

(6) Can the analysis be provided of marginal tax rates of taxpayers likely to invest in schemes which supports the assertion that a marginal tax rate of 37 per cent is appropriate for these calculations.

(7) Does the Minister agree that the following costs are representative for the purposes of estimating the cost of the measure establishment cost $5 069 per hectare, total cost over 11 years $9 286 per hectare (Lonsdale Securities Ltd, mean costs for nine eucalypt pulpwood prospectus projects).

Senator Coonan (Minister for Revenue and Assistant Treasurer) —The answer to the honourable senator's question is as follows:

(1) The industry estimates relate to the 13 month prepayment rule which was removed in the Review of Business Taxation.

(2) Yes.

(3) The tax deductible costs of forestry managed investment schemes were estimated at $5,000 per hectare.

(4) The cost of the measure, assuming an average marginal tax rate of 37 per cent, was estimated to be $25 million in 2002-03, $5 million in 2003-04, nil in 2004-05 and $25 million in 2005-06. If a higher marginal tax rate was assumed, the estimated cost of the measure would be higher.

(5) (a) The costing assumed a base of $200m investment in forestry managed investment schemes reflecting the actual level of investment provided by the Department of Agriculture, Fisheries and Forestry Australia.

(b) Senator Murphy estimated the level of investment to be between $560m and $700m. I am not aware of the source of the Senator's estimate.

(6) The costing assumed that the majority of investors in managed investment schemes would be taxpayers who incurred a business loss but did not earn any business income. An analysis of tax return data showed that the average tax benefit from business losses for these taxpayers was 37%.

(7) For the purposes of the costing, it was assumed that the average establishment cost is $5,000 per hectare. Other costs of investment are not deductible under the measure.