INVESTORS in several failed Great Southern schemes are facing the double indignity of losing control of their assets and receiving a hefty tax bill.
INVESTORS in several failed Great Southern schemes are facing the double indignity of losing control of their assets and receiving a hefty tax bill.
The fallout comes as fears surface that bids to wind up the schemes will take precedence over potential rescue packages.
Great Southern receiver McGrathNicol has released a list of schemes that have breached lease arrangements with third-party landowners, effectively stripping the control of the assets from investors to the landlords.
The bank consortium that was paying the lease holders up until September 30 has now directed its funding to projects of greater commercial interest, leaving investors with assets located on third-party-owned property facing substantial losses.
“The landlords may ultimately have a right to terminate the lease and a right to take possession of the leased properties," receiver McGrathNicol said.
“Where the landlords are able to take possession of the leased properties, the ownership of the trees may revert to the landlords and the future harvest proceeds are unlikely to be available to investors."
The affected assets cover everything from blue gums to almonds, and include about 4,500 investors in Great Southern Plantations' 2005 and 2006 timber schemes.
Investors exposed to Great Southern's 2008 high-value timber scheme are at risk of having to repay the Australian Taxation Office for deductions already claimed, as the trees were never planted.
“There may be tax implications for investors whose woodlots were not planted," McGrathNicol confirmed this week.
Investors in the more recent schemes may face a similar dilemma, as legislation dictates that the schemes only attract favourable treatment on the basis they comply with what their prospectuses said they were going to do.
Further, the deductions are assured provided the investment is held for the prescribed period of time, which at this stage is a minimum of four years.
Investors in schemes that are brought to harvest would avoid the potential headache.
An ATO spokeswoman said the office could not provide specific comment in relation to Great Southern. The tax office's general guidance is that it needs to consider scheme establishment dates and investor holding period issues to make a ruling.
The agribusiness sector raises most of its money at the end of each financial year as investors seek large tax deductions to offset their income.
It is understood the banks are funding certain schemes from week to week, until a successful bidder can take control.
Concerns have been raised that encumbered bids, or those that include a package to take the schemes through to harvest, are less favourable in the eyes of the receiver than unencumbered bids, or those that require the schemes be wound up.
“There's no doubt in our mind the receivers are trying to wind up as many as possible," one bidder said.
Land that is leased to investors is worth less than 'free' land, and would potentially attract a higher price for the bank creditors than an encumbered asset.
A spokesman for receiver McGrathNicol was unavailable for comment.
It is understood the receiver has told investor representatives that some of the encumbered bids simply weren't workable.
One investor representative who took part in a meeting with receivers late on Tuesday said the biggest problem was that only one bid for the major timber assets was public, giving investors little time to compare options.
The details of a bid lodged by Gordon Martin-based Pulpwood Plantations are largely public, while a Bunning family and Azure Capital-backed bid through Black Tree Propriety, and proposal by Timber company Gunns are both short on public detail.
“Until we can see the competing offers, there's not a lot we can tell investors," the representative said.
Mark Kailis, of Kailis Organic Olive Groves, said his bid for Great Southern olive groves contained a solution for investors.
