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Thursday, 7 September 2000
Page: 20390

Mr TRUSS (Minister for Agriculture, Fisheries and Forestry) (9:54 AM) —I move:

That the bill be now read a second time.

The Wool Services Privatisation Bill 2000 is the final step to deliver privatisation of the wool industry services provider, the Australian Wool Research and Promotion Organisation, AWRAP, and its operating subsidiary, The Woolmark Co. It passes ownership of the management of wool industry services into the hands of wool growers and reduces government's involvement to oversighting statutory funding and accountability. The process to establish the most appropriate structure to replace AWRAP has been comprehensive, and well supported by wool growers. It has been a strong example of government and industry working together to achieve a common goal.

The initial impetus for reform stemmed from the low demand and poor prices for wool over the last decade. In response to the uncertainty felt by many in the wool industry, the government appointed the wool industry Future Directions Taskforce in December 1998, chaired by the Hon. Ian McLachlan AO, to define the issues facing the wool industry and to identify appropriate responses. The government supported the broad thrust of the recommendations in the task force report.

A voluntary wool grower ballot, known as WoolPoll 2000, was conducted in March this year, with wool growers indicating their preferences for a two per cent wool tax to be invested in research and development, technology transfer and delivery and some information services. In response to the WoolPoll result, the wool tax rate was lowered to an interim rate of three per cent from 1 July 2000. This interim rate is to cover the costs of transition to a mainly research and innovation body, and from a government authority to private ownership. The levy will be further reduced to two per cent as soon as these costs are met following the establishment of the new arrangements.

Following WoolPoll, a process to identify the most appropriate Corporations Law structures to replace AWRAP was undertaken in conjunction with the wool Interim Advisory Board, IAB, and the Woolgrower Advisory Group, known as the WAG. The preferred structure received unanimous endorsement from the Interim Advisory Board and the WAG.

The new structure

The bill provides that AWRAP will be converted to a Corporations Law holding company limited by shares, to be called Australian Wool Services Ltd. It is proposed that AWRAP's successor will have two principal subsidiary companies. The boards to be established under the new arrangements will be responsible primarily to their shareholders, rather than to the government.

One subsidiary of the holding company, nominally called `CommercialCo', is expected to be AWRAP's current subsidiary, The Woolmark Co. CommercialCo will be involved in the commercial development of the woolmark and its sub-brands and the commercialisation of intellectual property matters.

The other subsidiary, nominally called `R&DfundCo', will manage the proceeds from the wool levy and will outsource wool industry R&D. It will also manage intellectual property arising from this research.

The creation of the two subsidiaries allows for transparency and contestability in the expenditure of levy funds, as well as maximising the commercial potential of the assets.

These arrangements also provide flexibility for the new main board to consider the demerging of the holding company from its subsidiaries within 12 to 24 months, leaving the two subsidiaries as stand-alone commercial companies directly owned by shareholders.

Wool tax to a wool levy

The bill allows for the establishment of a wool levy to replace the current wool tax. This change will see the compulsory industry contribution arrangements harmonised with all other agricultural industry levies. The wool levy will continue at the same rate as the wool tax, currently three per cent. The establishment of the wool levy will also help in the future conduct of wool levy rate ballots and will also assist to maintain the accuracy of the shareholder register by ensuring accurate wool levy information is passed onto the register managers.

Shareholder arrangements

A list of eligible wool growers as provided for in the bill allows for shares in the holding company to be issued to eligible wool growers. This list of shareholders will form a dual-class register which gives voting entitlements to shareholders in relation to activities of the R&DFundCo subsidiary and the CommercialCo subsidiary.

The bill also provides for a period in which incorrectly issued shares can be removed from the register to ensure its accuracy.

Wool growers will be invited to apply for shares by providing evidence of wool tax paid over the three-year period to 30 June 2000. The establishment of a voluntary shareholder register is a major logistical exercise. At this stage, the intention is that I will sign off on the list of wool grower shareholders in time for the company to be established on 1 January 2001, subject to the appeal procedures and dispute resolution procedures being completed by the company over the following six months.

Taxation issues

In relation to tax treatment, government worked on the simple principle that neither the new company nor its shareholders should be disadvantaged in moving to the new privatised arrangements. To achieve this, the bill includes provisions which exempt the company and shareholders from certain taxes in relation to specific steps involved in the restructure process.

There will be a nil cost base for CGT purposes for shares issued in the new arrangements. This was a decision based on two good reasons. Firstly, wool growers will not pay for the shares they receive, and in the payment of their wool tax for industry research and other services there was no expectation that this would lead to realising equity. Secondly, growers have already been able to claim a deduction for the wool tax they have paid which results in their share allocation. To establish a cost base now would essentially mean wool taxpayers would receive a double benefit.


Whilst government is committed to minimising its involvement in the new arrangements, as long as payments continue to be made to the company by the government it is appropriate for government to responsibly monitor the expenditure of those payments. The bill provides for the government to enter a contract with the company in relation to payments of wool levy and matching government R&D contributions.


The bill provides for the new arrangements to commence on a date to be proclaimed. This is to ensure that all outstanding issues are completed prior to the privatisation of AWRAP and its subsidiary, The Woolmark Co. It is intended that this will be before 1 January 2001.

HR strategy

Consistent with the government's policy for guiding decision making on staffing and employee conditions matters in privatisation processes, a strategy is being developed to ensure that AWRAP staff are transferred to the new arrangements without breaching their employment contracts.

Inaugural board

It has always been intended that the new board will be drawn from the existing IAB and supplemented as necessary where additional members or skills-mix are required. The new board will not have a government member, consistent with the commitment to the wool industry to minimise government involvement in the new arrangements.

Benefits of privatisation

The process to privatise AWRAP is in response to industry calls for reform. The new arrangements differ from AWRAP in a number of key areas which address industry concerns:

wool taxpayers will be the owners of the new arrangements;

there will be full contestability and transparency between the receipt and expenditure of the wool levy and matching R&D funds;

the government's role will be limited to that required for accountability for the wool levy, matching R&D funds received and ensuring efficient and effective service delivery;

shareholders in CommercialCo will have the opportunity to realise future capital gain as a result of share trading; and

the new companies will operate as commercial entities under the Corporations Law.


The privatisation of AWRAP is part of a larger process to enable the wool industry to assume ownership of its service delivery body and for it to be accountable to levy payers as shareholders. Industry and government have worked closely together to produce this important result for the wool industry. The good work done by the IAB, under the leadership of Mr Rodney Price, and by the Woolgrower Advisory Group, under the leadership of Mr David Webster, have ensured that the process has run smoothly and to schedule. I pay a warm personal tribute to the cooperation that there has been within the industry to reach this important stage today. This is milestone legislation for the wool industry, and I take great pleasure in commending this bill to the House. I present the explanatory memorandum to the bill.

Debate (on motion by Mr Sciacca) adjourned.