Tax Office Chops Off Tree Plans

Sydney Morning Herald

Tuesday August 24, 1999

By ANNE LAMPE

Mosman financial advisory firm Monpro Ltd yesterday appointed an administrator following the Tax Office's crackdown on financial-year-end agricultural investment schemes.

Monpro specialised in selling investment schemes in tea-tree oil, grapes, macadamia nuts, orchards, timber and biotech products.

Ms Susan Price, Monpro's managing director, said yesterday that the company's turnover had been slashed to a tenth of its level of two years ago, when the Tax Office began investigating schemes that allowed taxpayers to drastically reduce PAYE tax with a one-off investment, usually with borrowed funds.

The company was heavily involved in marketing ``Budplan" products by Mainstar One, a tea-tree oil producer that branched out into ``tax-effective" investments.

Mainstar is under investigation by the Australian Tax Office, the Australian Securities and Investment Corporation and the National Crime Authority.

Mainstar founder Mr Glen Stotter recently stepped down from the group after a long-running legal battle with several disgruntled investors who have now taken control of the company.

``Back in the Budplan days there was a lot of business being written and we had the overheads to support that.

``Last year there was very little of this type of business being written following the introduction of product rulings," Ms Price said.

In 1997, the ATO targeted the Budplans which had been sold to about 10,000 investors over four years and in which investors plunged an estimated $800 million, mostly borrowed from a Mainstar associated company.

A test case on whether the plan complied with tax rulings is expected to be heard in the Federal Court next year.

Ms Price said Mr David Diamond had been appointed administrator, adding ``hopefully we can scale right back."

Monpro began in 1995. Two years ago, it had an office in Perth, representative offices in Melbourne and Brisbane and 32 advisors. It now has six.

Without the incentive of lower PAYE tax in each pay packet, since the ATO stopped processing the claims, the schemes became harder to sell.

Ms Price believes that Monpro's problems are not widespread in the financial advisory industry. ``We are one of the few firms who just carried these sort of products. Most planners have other products so they are not so reliant on tax-effective projects."

The company is now trying to put its own projects together rather than selling only product off the shelf.

``We are trying to take a more active hand in trying to control the product," Ms Price said.

``Discussions are taking place with several people to obtain equity injections and to develop more mainstream financialproducts.

``It was never really our intention to sell just tax-effective projects. We saw them as a niche and because they became so popular we did not diversify. And we certainly need to do that."