Plantations and Farm Forestry

Expanding the Resource Base

The Policy Framework:

The Commonwealth Government is committed to the ecologically sustainable development of the nation s forest and land resources.

The National Forest Policy Statement, agreed to by all Commonwealth, State and Territory Governments, identified the following National plantation goals:

• to expand Australia s commercial plantations of softwoods and hardwoods so as to provide an additional, economically viable, reliable and high quality wood resource for industry;
• to increase plantings to rehabilitate cleared agricultural land, to improve water quality, and to meet other environmental, economic or aesthetic objectives.

There are considerable opportunities to expand the plantation estate. While Australia has historically depended on native forests to meet the bulk of its wood supply needs, plantations and farm forestry present the most significant opportunity for future growth. An expanding plantation resource base is critical to the development of internationally competitive, dynamic and ecologically sustainable forest and forest product industries.

Plantation based industries can contribute significantly to regional economic development by value adding locally to primary production and generating downstream processing jobs.

The Government recognises that plantation development on farms also has the potential to provide substantial environmental, landcare and agricultural productivity benefits to landholders and the broader community.

By world standards Australia has relatively well developed softwood plantations with around 960,000 hectares or 87% of the plantation estate. Hardwood plantations are relatively less developed with around 145,000 hectares of mainly eucalypt plantations. Since 1990 the total area of plantations has been expanding by about 25,000 hectares a year, representing an annual investment of about $75 million.

Investment planned for the wood and paper industries will ensure that this contribution to the economy increases significantly over the next decade. It is expected that up to 15,000 new jobs may be created over the next 5 years in the production and processing of plantation grown wood.

In recent years plantations have been expanding by about 25,000 hectares a year. In contrast to earlier trends, this expansion is driven mainly by new plantings of eucalypt hardwoods grown mainly for the pulpwood market. There are some concerns that the decline in the rate of establishing new softwood plantations may inhibit the trend toward investment in major processing facilities if long term supply is not assured.

The Government believes there are considerable opportunities to further expand the plantation estate and to better utilise the available wood resource. This will place Australia in an ideal position to take advantage of emerging market opportunities in the Asia-Pacific region.

The Government s approach to plantations policy is that it should be based on ecologically sustainable practices and that plantations should be economically viable and internationally competitive. However, government has a role to play in fostering plantation/farm forestry development by removing unnecessary impediments, helping to create a competitive market place, improving regional planning and coordination, and facilitating community access to information.

The availability of cleared land for plantation development is currently constrained by a number of factors. While Australia has sufficient supplies of cleared land capable of supporting commercial tree growing, the bulk of this land is privately owned, much of it by farmers who have not traditionally been involved in the forest industries. The area of Australia s plantation estate owned by farm foresters is estimated to be about 5 per cent. It is clear that if the plantation estate is to expand, much of the new plantings will need to be undertaken in cooperation with farmers and other landholders.

To encourage plantations on farms, the Government will expand the successful Farm Forestry Program and take a range of other measures designed to enhance, expand and diversify Australia s plantation and farm forestry resource base.

The Government is committed to fostering a regional approach to plantation/farm forestry development by working in partnership with the States, local government, regional development organisations, industry, unions, landholders and landcare and community groups.

Under the Wood and Paper Industry Strategy, the Government is implementing a range of measures to encourage plantation and farm forestry development. The Government will provide $8 million over four years to progress these initiatives. These measures will support industry s objective of trebling the area of plantations by 2020.

WAPIS PLANTATION INITIATIVES

• Removal of export controls on plantation grown wood in 1996, subject to protection of environmental values through State codes of practice.
• Removal of taxation anomalies and impediments on the sale of plantations. Other taxation issues will be subject to further review in 1996.
• The National Forest Inventory in the Bureau of Resource Sciences will work to improve the availability and quality of information on the plantation estate at the regional level. In particular, work will be undertaken to improve the information on public and private plantation areas, locations, age class distributions and projected wood flows.
• The Australian Bureau of Agricultural and Resource Economics (ABARE) will be asked to report on medium and long term trends in Australia s forest product and log markets.
• In collaboration with regional stakeholders, ABARE will undertake detailed economic assessments of the potential for increased plantation development in at least 5 key regions.
• In conjunction with industry and research bodies, the Government will sponsor a major conference on plantations in 1996.
• In cooperation with the States, industry, landholders and conservation and community groups, the Government will support the establishment of Regional Plantation Committees to catalyse, plan and coordinate plantation development in key regions throughout Australia.
• Additional funds will be provided through the Forest and Wood Products R&D Corporation for research into the growing, managing and utilisation of plantation and regrowth timbers.
• A National farm forestry facilitator will be employed to assist industry and community development and provide strategic advice to government.
• A National farm forestry roundtable will be established to provide an Australia wide forum on farm forestry.

Removing impediments to plantation establishment:

Export controls:

The Government believes the removal of export controls will encourage further investment in the plantation sector.

The Government will act to remove export licence controls on plantation grown wood on, or as soon as possible after 1 January 1996. However, before export controls are removed, the Government will ensure that satisfactory codes of practice are in place to protect environmental values. The Government will seek the advice of the CSIRO to ensure that State codes are scientifically rigorous.

The Government will request the Wood and Paper Industry Council to monitor the impact of removing export controls on domestic processors. The Council will also identify strategies to maximise domestic processing opportunities.

Reviewing tax treatment of plantations:

In regard to taxation, the Government s goal is to promote plantation development by ensuring that treatment of plantations is reasonable and favourable to investment. The Government has acted to address specific concerns raised by industry. Specifically:

• Legislation has recently been passed to ensure that only the net proceeds of plantation sales are taxable. Review by 31 March 1996 of other tax arrangements including provisions relating to the sale and purchase of immature plantations.
• The Government will address the possibility of double taxation of plantation royalty arrangements under capital gains tax. The Australian Taxation Office will identify the best means for resolving this anomaly no later than July 1996.
• To deal with the possibility of double taxation resulting from profit a prendre (or harvesting right) arrangements, the Australian Taxation Office will issue a public determination no later than March 1996. Further, the Government will review, no later than November 1996, the tax consequences of an easement, profit a prendre , and a right to a royalty stream.

Outstanding taxation issues, including income averaging arrangements and the deduction of establishment expenses relating to investment schemes, will be the subject of further review by the Government in early 1996.

To ensure investors are informed of how to best undertake investment in plantations, the Government will extensively publicise the revised tax arrangements during 1996.

State and local government impediments:

State and local governments have primary responsibility for several areas where impediments to plantation development have been identified. Nationally, the Government will encourage the development of a planning and regulatory framework based on a view of plantations as long rotation agricultural crops.

The Government will work with State and local governments, industry and the community to:

• remove uncertainty over harvesting rights and ensure commercial tree growing is treated as an as of right use
• establish a sound legal basis for separating the ownership of plantations from the land on which they grow;
• develop and implement appropriate codes of practice; and
• simplify planning procedures and ensure land-use planning controls and land rating systems do not discriminate against commercial tree growing.

Plantations on Farms

Community Rainforest Reforestation Program (CRRP)

The Government will pursue these and other reforms related to increasing competition in the forests sector and removing market distortions in the context of finalising the Regional Forest Agreements and through the National Competition Policy Reform Agenda and the Ministerial Council on Forestry, Fisheries and Aquaculture.

Plantation - Farm Forestry Program:

The objective of the Farm Forestry Program is to promote commercial wood production on cleared agricultural land and, where possible, to integrate plantation enterprises with other agricultural land uses.

Farm forestry: is the incorporation of commercial tree growing into farming systems. It can take many forms: plantations on farms; woodlots; timberbelts; alleys and wide-spaced tree plantings.

Commercial Farm Forestry Projects

To date, the Farm Forestry Program has had considerable success in raising the national awareness of farm forestry.

The Government will build on this success by providing additional resources to enhance and expand the program. Funding will be made available for at least 15 regional, commercial, farm forestry projects across Australia and a range of national strategic projects.

Potential regions will be characterised by some of the following favourable factors: existing industries are in place; proximity to port facilities; sufficient rainfall; available suitable land; identifiable landcare benefits; high levels of farmer interest. Priority will be given to regions capable of demonstrating prospects of economic viability, landholder adoption, and significant landcare and environmental benefits (shown on map).

The focus of the program will be to:

• build up the knowledge and skills of landholders in establishing, managing and harvesting trees for commercial purposes;
• improve the availability of information about all facets of commercial tree growing;
• develop and enhance regional farm forestry strategies, focusing in particular on industry development but also on integrating commercial tree growing activities with other land, water and vegetation management strategies;
• establish strategic demonstration plantings, and ensure these are effectively used for extension, research and monitoring purposes and are consistent with other regional strategies and property management plans;
• support the development of effective linkages between farm forestry and labour market and training programs;
• provide support for specific landholder and community led initiatives, including increasing the capacity of smaller growers to form treegrower cooperatives and thus overcome diseconomies of scale in product marketing, undertake wood supply planning and develop tailored investment and marketing strategies.

Regional Planning and Coordination

To optimise investment in plantation/farm forestry development and integrated wood processing operations, industry requires access to reliable, quality wood supplies. To achieve this many issues will need to be resolved. It will also be necessary to ensure plantation development occurs in a way which meets the social aspirations of local communities.

The Government will help to resolve these issues by providing support for industry, conservation and community stakeholder groups to:

• establish Regional Plantation Committees to address planning and coordination issues and act as a catalyst for development;
• employ plantation development officers, undertake feasibility studies, and develop regional plantation development strategies.

This support will allow regions to identify and promote appropriate products and markets, infrastructure requirements, investment and processing opportunities, training needs, and research and development gaps.

Support will be provided for a range of initiatives for farm forestry at the regional and national level. Support will also be provided to initiatives which demonstrate nationally significant and innovative approaches to farm forestry development.

Grants for National strategic projects will be provided on a competitive basis and will include the following indicative areas:

• training and education for extension agents, farmers and labour market trainees;
• communication mechanisms;
• demonstration of best practice approaches;
• national workshops;
• methods for systematic monitoring of demonstrations/trials;
• technology transfer;
• non-wood products; and
• low rainfall agroforestry.

The Government will also support the establishment of a National Farm Forestry Roundtable and employment of a national facilitator to assist industry and community development and to provide an Australia-wide forum on farm forestry.

Eligibility and Selection Criteria:

The emphasis of the Farm Forestry Program will be on regional and strategic initiatives that are linked with the requirements of the market and regionally based forest industries.

The Government will give preference to applications that have been developed cooperatively by farmers and landholders, local and State governments, regional development organisations, industry, unions and landcare and community groups.

Preference will also be given to projects which demonstrate a clear linkage with Government, community and industry programs, including in the areas of land and water management, research and development, the environment, regional development and employment and training programs.

The program is intended to integrate and build on existing Commonwealth, State and regional planning, extension and training programs and demonstration facilities.

In addition to progressing the overall objectives of the FFP, regional projects should to the maximum extent possible:

• be directed towards a regional farm forestry strategy;
• have specific objectives in relation to demonstration, extension and/or training aspects with annual targets for measuring the progress and success of the project

In detailing how the project addresses the above criteria, the project proposal should give particular attention to:

• providing information on the potential for commercial farm forestry in the region, including:
  - prospects for adoption of farm forestry by landholders in the region;
  - economic viability and marketing aspects, and
  - availability of suitable land.
• demonstrating that the applicant has sufficient expertise and resources to achieve the project s objectives.

Proposals to establish demonstration plantation sites must show how these will be used strategically for extension, research and monitoring purposes. They must also be designed to be consistent with regional plantation/farm forestry strategies and property management plans.

In relation to national strategic projects, proposals will be assessed against the extent to which they progress overall program objectives, and the following criteria:

• the extent to which the project provides information, develops technologies or management strategies which have inter-regional or national application;
• project outputs lead directly to improved program outcomes at the national level;
• the project improves the coordination of regional projects;
• the project is developed on an inter-regional or national scale in cooperation with a range of other state, national or non-government organisations;
• technical merit of the project and the demonstrated capacity of the proponent to achieve the project s objectives.

Funding:

Under the Wood and Paper Industry Strategy, the Commonwealth will provide $15 million over four years (1995/96 to 1999/2000) to implement the Farm Forestry Program.

Development of proposals:

It is recommended that prospective applicants contact the Department of Primary Industries and Energy at an early stage in the development of their proposals. This will enable the Department to provide preliminary advice on eligibility criteria, how to prepare applications, how they might be improved, and the scope for merging with other proposals to form regionally integrated projects.

How to apply for a grant:

Application forms and further information are available from:

The Coordinator
Farm Forestry Program
Forests Branch
Department of Primary Industries and Energy
GPO Box 858 CANBERRA ACT 2601
Ph: (06) 271 6417 or (06) 271 6380
Fax: (06) 272 4875