Thursday, 9 July 2015

Ta Ann's exceptional year


2014 was an exceptional year for Ta Ann Tasmania Pty Limited (TAT).

It will  likely be the only time TAT gets to pay Australian income tax.

TAT’s belated annual report for the 2014 calendar year was lodged late in June, two months after TAT’s parent Ta Ann Holdings Berhad P/L filed its return.

TAT’s tax bill for 2014 was only $450,000 so it won’t break the bank.

It’s not only Google and Apple who resort to accounting tricks.TAT too managed to shift almost all the taxable income resulting from recent government handouts of $33.3 million back to Malaysia, the home jurisdiction of the Group.

Tuesday, 16 June 2015

FT's coming of age?


In a few weeks Forestry Tasmania will celebrate its 21st birthday.

It’s likely to be a subdued coming-of-age bash as the future looks murky. That it has lasted this long may be the only reason for merriment for some.

Liabilities now exceed assets. It can’t pay its way. If it was liquidated, the Tasmanian Government would be faced with a shortfall it would meet by taking over the unfunded superannuation liability.

Adjusting for the way we now value trees, $566 million in net assets were transferred in 1994 to establish Forestry Tasmania. Since then Forestry Tasmania has received $340 million in cash grants from governments and has spent $400 million on new assets, roads and plantations.

Roughly $140 million of grants have been for operating, funds to reimburse community service obligations, and funding to cover recent trading deficits.

The balance of $200 million of grants has been to establish plantations to build an asset base to provide future revenue.

About $20 million is yet to be spent as intended, the cash went to pay other expenses.

Despite all the grants, net assets are now zero.

Saturday, 30 May 2015

State budget luck


THE sudden turnaround in the state’s fiscal fortunes as revealed in Treasurer Peter Gutwein’s Budget this week has everyone wondering.

Is it good management or good luck?

Only one more deficit, in 2015-2016, before we return to surplus in 2016-2017. Can this be true?

It depends on how one calculates a deficit. If one does so on a cash basis as the Federal Government does, then Tasmania will be in deficit for the next two years at least.

To most observers it is misleading to proclaim a surplus when cash outlays exceed cash receipts. That’s what Mr Gutwein has done. Cash outlays are 2 per cent more in 2015-2016 and 1 per cent more in 2016-2017.

With the State Government operating a cash in/cash out operation, it’s the only sensible prudent way to assess our situation. Thereafter cash surpluses are predicted.

But with each successive year the reliability of the forward estimates diminishes exponentially.

Even with blue sky forward estimates, the Government’s actual cash position only improves by $90 million over the next four years.

Thursday, 14 May 2015

Failing to find path to credibility


Prime Minister Menzies was never pilloried for running seventeen successive deficits and risking burdening my generation with onerous amounts of debt.

Times changed and deficits became taboo.

The latest budget shows deficits are here to stay. Even the uncertain projections of later years reveal deficits.

The talk is now of having a creditable path to a surplus.

Arguably the more pressing need is to find a credible path to credibility.

Never has there been such a radical shift from one budget to the next, from fixing a debt and deficit disaster to living with a wing and a prayer twelve months later.

The Budget is predominantly a political reaction not an economic plan.

Monday, 11 May 2015

MIS post mortem


In response to an invitation by the Senate Economics Committee chaired by Sam Dastyari (with members including Nick Xenophon Bill Heffernan and Peter Whish-Wilson) to make a submission to their inquiry looking at forestry MISs the following brief overview of what happened during the MIS debacle was submitted.

Problems with MIS have been written about for a few years but with the dust almost settled following insolvency of the three MIS companies which operated in Tasmania  (Gunns FEA and Great Southern) which represented about 50% of the total national MIS  scene, it was important to explain that the aftermath is of Hiroshima proportions and needs remedial action lest travesties reoccur in the future..

Contents

Issues

1.      Motivation and drivers

2.     How much was lost?

3.     Reasons for failure-the product

4.     Reasons for failure-the model

5.     ATO’s role

6.     ASIC’s role

7.     Yields

8.     Overview of past MISs

9.     Is div 394 the answer?

10.  What now?

Appendix: MIS wind up notes for Great Southern, Gunns and FEA

Terms of reference

 

Wednesday, 29 April 2015

FT closer to closure


The ministerial statement on the future of Forestry Tasmania today was an announcement of the appointment of a de facto Administrator.

Expressions of interest are to be invited for some of FT’s assets, mainly the hardwood plantations, which hopefully will be enough to cover the costs of Administration.

FT will then almost certainly be wound up.

It was always going to be this way. The talk about transitioning to other, in this case, private operators, is simply a restatement of what happens when companies are wound up.

Minister Harriss is pretending that selling assets in Administration will save FT from Liquidation.

How often do Administrators forestall liquidation and manage to return a company to normal trading without equity injection or a significant compromise with its creditors?

None spring to mind.

Sunday, 29 March 2015

Americans buy FEA


FEA’s Receivers Deloitte has at last found a buyer for FEA’s land and trees.

Resources Management Services LLC (RMS) a forestry investment manager from Alabama paid $125.5 million for land belonging to FEA and trees belonging to FEA’s MIS growers.

The sale price confirms that forest assets have continued to plummet in value. The sale price is a disaster for everyone waiting for a distribution, the secured and unsecured creditors and the growers.

The insolvency practitioners stand the best chance of getting paid in full.