IN APRIL last year the first of the big tax-effective agribusiness schemes, Timbercorp, collapsed. Within three weeks Great Southern followed it to the corporate graveyard.
This April, Forestry Enterprises Australia of Tasmania went into administration and in May a Perth agribusiness scheme, Rewards Group, did the same.
Yesterday it was the turn of Willmott Forests to go down what has become a well-worn path.
The slow demise of these agribusiness companies is attributable to one overriding factor: investments that were not generating enough profit to pay investors and keep the company in business.
In fact, the companies were kept alive by what a parliamentary inquiry found last year was the development of ''business models with a Ponzi-like character''. That is, they always depended on new investors' cash coming through the door to prop up their operations.
In good times the cash kept coming because of an extremely well-rewarded sales force.
A principal of Macpherson + Kelley Lawyers, Ron Willemsen, said yesterday that between 8 per cent and 12 per cent of Timbercorp investors' money was paid to financial planners and accountants as a commission on sales.
The sales were egged on by investments that gave investors a generous upfront tax deduction.
Everything rocked along well enough in boom times. But Willemsen said things started to sour when the Australian Taxation Office issued a ruling that disallowed upfront deductions for non-timber agricultural products in February 2007.
The cash coming through the door started to grind to a halt as the olive, almond, mango, avocado and wine grape offerings lost their lustre.
Then along came the global financial crisis, which meant the debt-heavy structures were on a lifeline from banks that were no longer so understanding.
But the ultimate fact was, for all the tax-effective structures and promises of profitability, the actual agricultural forestry businesses did not appear to be that good in the first place.
Willemsen, who is representing 4000 Timbercorp and Great Southern investors in class actions, said: ''If those projects had run their full course it's highly unlikely people would have [the] returns they expected in the first place, because of all the expenses that had to be carried by the structures.''
Paul Drum, the general manager of policy and research for the professional accounting body CPA Australia, said investors had been lured by promised tax deductions without fully examining the issue of fundamental profitability.
''People weren't looking at the long-term profitability when they saw they avoided a short-term tax liability.''
Willemsen said the Timbercorp and Great Southern class actions would allege investors had been kept in the dark about just how parlous agribusiness really was.
''The investors were not in a position to know that the investment structure carried a very real risk,'' he said.
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