NEW tax measures expected to severely limit the timber plantation industry's ability to raise new capital have prompted urgent talks between its members and the Federal Government. More than 80 members of the industry met with Forestry Minister Wilson Tuckey in Canberra last week to devise modifications to the new tax measures, which would help it maintain capital funding. The abolition of the 13-month rule under the Government's tax changes is expected to hit the industry hard, depriving it of investors who are seeking to minimise their tax exposure near the end of the financial year. It is these type of investors which have fuelled the recent growth of timber plantations, and the industry is reluctant to let them go. The most pressing change requested by the timber companies was for the delay of the new tax measures until the start of the next financial year. The request were put by Mr Tuckey to Federal Treasurer Peter Costello late last week. Major plantation company Timbercorp Eucalyptus executive chairman David Muir said, although his company could cope with the adjustment, many companies had obtained finance and issued prospectuses on the assumption that the 13-month rule would continue. Also the new measures still had to be enshrined in legislation, so many believed the move to abolish the 13-month rule immediately was premature, Mr Muir said. The timber industry has enjoyed rapid growth in the past few years, with the annual planting of trees lifting from 30,000 hectares in the early 1990s to 60,000ha recently. "It is obvious, it (the growth) is being driven by the attractiveness of being able to invest and get an immediate tax deduction," Mr Tuckey said. He and the industry are now concerned that part of that attractiveness will be eroded. Under the 13-month rule, pre-payments for services undertaken within 13 months are immediately deductible. As a result, the industry proved attractive to investors who wanted to reduce their tax exposure towards the end of the financial year. The new tax measures will mean pre-payments will be deductible over the period which the services are provided, rather than being immediately deductible. So investors who pre-pay in June will only get a one-month deduction. Given the 13-month rule has been in effect since 1936, the industry's request to delay its abolition until the start of the next financial year was a fair one, Mr Tuckey said, and one he would present to Mr Costello. "A lot of their (plantation industry) money is coming from people, who, if they can't invest in trees, will go and invest in something else," Mr Tuckey said. "You can go and negatively gear a block of shares, prepay the interest and get the same outcome, but that has no benefit to rural Australia or to our trade deficit of $2 billion a year." Plantation timber investors knew they would not get a return for 10-20 years, Mr Tuckey said. People who put money into superannuation enjoyed a concessional tax arrangement for that same reason, he said, so the forestry industry should be granted similar status.