THE twin evils of managed investment schemes and carbon sink forests have combined.
MIS companies are now offering carbon sink plantation projects - and both MIS and CSP offer 100 per cent upfront tax deductions.
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- Editorial: MIS lessons not sinking in
- Should carbon sink forests attract a 100 per cent up front tax deduction similar to MIS?
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Analysts have said the carbon sink projects alone could be another MIS-style disaster for rural Australia.
The Weekly Times revealed last year that Treasury modelling indicated six million hectares would be planted to trees if the price of carbon got to $20.88 a tonne.
The Government has denied land bought for carbon sink plantations would be tax deductible, but tax barrister Michael Bearman has previously told The Weekly Times carbon sink owners could write off the cost of buying land.
MIS company The Rewards Group has announced it will buy 50,000ha of "low-cost degraded farm land" in the West Australian wheat belt.
The plantation will be eligible for carbon credits under Kyoto rules.
Planting will begin in July and it will sequester 12 tonnes of carbon per hectare a year, the company says.
Carbon abatement permits could then be sold to polluters.
The Rewards Group is in financial trouble - it manages more than 12,000ha of MIS projects and owes rent dating back to last year to its landlord The ARK Fund.
The companies have announced a merger and together aim to raise $55 million in capital to keep afloat.
Maverick Liberal senator Bill Heffernan said the issue should be scrutinised by a senate committee.
"I'm not in favour of re-learning the lessons wine, forestry and cattle have learnt from outrageous distortion of the market by MIS," senator Heffernan said.
Forest industry analyst Dr Judith Ajani said the science behind the claim that plantations would sequester 12 tonnes of carbon per hectare per year "needs to be rigorously reviewed".
"This is marginal land with erratic rainfall," Dr Ajani said.
Nationals MP John Forrest said he would not support upfront tax deductions.
"You'll just abuse it, history has proven that," Mr Forrest said.
"If it was commercially profitable to invest in carbon sinks, go do it, don't ask for special tax breaks."
Both Labor and the Liberals have voted to keep tax breaks for carbon sink plantations.