Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Hansard source

I note the report and look forward to reading the full contents of it. But I do want to make a contribution to the general discussion of managed investment schemes in Australia. It should be noted that there are over 5,000 managed investment schemes being run in Australia as we speak. Sure, some of them have run into trouble. What I would suggest to honourable senators is that we leave it to the liquidators and administrators to come to conclusions as to why and how that occurred. It would be as ludicrous as to say that the retail sector in Australia should be closed down because Harris Scarfe went through the hoops, or because some other retail company failed.

Unfortunately, in a competitive marketplace you will have certain companies, enterprises and pursuits succeeding whilst others are failing. Just because one, two or indeed three fail that does not of itself mean that the particular enterprise that people are engaged in is a bad enterprise. The chances are it means that management of the failed schemes was not as robust as it otherwise might have been. Indeed, some analysts—and I simply leave it at that, some analysts—suggest, for example, that if Great Southern—and I do not want to get into a debate about Great Southern other than to say this—had not diversified into cattle properties or had been able to offload, I think, about $700 million worth of cattle properties, their timber sector would have remained viable and would still be up and running today. It is those inconvenient facts that Greens like Senator Milne so studiously avoid in any discussion of managed investment schemes.

I also say to senators: be very careful about what you wish for. I still recall the outcry in rural and regional communities when compulsory superannuation, enforced savings, came in. That meant that nine per cent of people’s income found its way to superannuation funds that invested their moneys in office blocks in the cities and people were saying, ‘Where’s the money that used to float around in our rural and regional communities?’ I can tell you that agricultural and forestry managed investment schemes have seen money going from the cities back into rural and regional Australia. For example, ask the local nurseryman who has been able to grow the cherry trees for the cherry orchards or the walnut trees for the walnut groves that we have in Tasmania. Ask the contractors who are employed to do the ground preparation, the spraying, the weed control or the fencing. All that sort of activity has been of great assistance to rural and regional communities.

It was most interesting to listen to Senator Milne complaining in particular about managed investment schemes for forestry. It was the Greens’ policy position to get out of old-growth forests and native forests. As a result, previous governments said, ‘If we are going to withdraw from that sector and Australians still want wood products, we will have to grow timber fibre and product on a plantation and no longer harvest our native forests.’ So we moved to plantations with a slight tax incentive—I do not think it is much of a tax incentive, quite frankly—and do you know who called for tax incentives for plantations? None other than the leader of the Tasmanian Greens. I think that was in 1996. Do you know who that leader of the Tasmanian Greens was? The now Deputy Leader of the Australian Greens, who has morphed into a senator and now condemns the policies that she previously supported, including the conversion of prime agricultural land on the north-west coast of Tasmania—at least I think it was about one third of it—to tree plantations. Now she rails against such activities. That is the great thing about being an Australian Green: you never have to be consistent and you never have to be logical; all you have to do is bash the can that is around at the time and try to get some cheap publicity. Consistency ain’t a hallmark of the Australian Greens.

I say to those who want to attack managed investment schemes: be very careful about what you wish for. I say that because they have provided great incentives and great opportunities. I still recall being part of the first commercial harvest of garlic in my home state of Tasmania. Ninety per cent of the garlic consumed in Australia is imported from China. There was a Greek individual who thought Australia should grow its own garlic and he had the wherewithal to do it, the capacity to do it, other than the financial backing. He went from farmer to farmer and to farm organisations and to all sorts of companies seeking assistance and failed year after year. Finally a managed investment scheme operator said, ‘Let’s try and see if we can interest people in growing garlic.’ It was grown on a landholder’s property in northern Tasmania. After years of experimentation in Victoria and Tasmania, Tasmania—and can I say how delighted I was about this—won out in relation to where it grew best. We were able to get a commercial domestic garlic crop which Coles were then willing to purchase. It was a great thing for Australian agriculture but, unfortunately, that first commercial crop came at exactly the time when Treasury and the Australian Taxation Office took a view which I thought was wrong in law and in principle in relation to managed investment schemes. Without airing too much dirty linen from the Howard years, I remember a debate within the government about this very matter. Whilst I have only ever seen myself as a humble suburban solicitor, I did read all the cases in relation to managed investment schemes and it was my considered opinion, on the basis of all those authorities, that the ATO and Treasury were heading for an absolute flogging by refusing to provide product rulings for the non-forestry sector. Two years later the Federal Court ruled as I predicted they would, but of course the non-agricultural sector had two years of no product rulings, which caused it a lot of grief. It will be interesting to see what responsibility the ATO and Treasury will take for not allowing that financial flow to non-forestry managed investment schemes and for what happened to them.

Can I simply put on the record—this is an error by some, a deliberate misrepresentation by others—that managed investment scheme funds cannot be used for the purchase of real estate. That is a fact and that needs to be understood. In relation then to upfront tax deductibility of things such as management and rent and lease costs, they are 100 per cent deductible, just as much as a farmer, if he were to rent or manage the next-door neighbour’s property and plant a crop, would have all of those costs available to him as a 100 per cent tax deduction.

I want to quickly finish on this note. Some people argue against MISs on the basis that there should be one tax regime for all. I simply say to my friends in the rural community: farm managed deposit schemes do not apply to MISs and income averaging does not apply to MISs, and if you hold that as a dear principle of equality in taxation treatment, you would then have to get rid of farm managed deposit schemes and you would have to get rid of income averaging, and that would cause great dislocation to the rural and regional communities of our country.

Question agreed to.