Kahlbetzer Family and Twynam Pastoral

Feb 12, 2021 | Secret Rich List

Top 200 Rich List (2020)No. of Dark Companies: 4
Political Donations since FY 1998-99
Rank: 92Kahlbetzer Investments Pty LtdLabor Party: $0
Wealth: $1.1bTwynam Group Holdings Pty LtdCoalition: $60,150
Wealth (2019): $1.7bTwynam Investments Pty LtdIndependent: $0
YoY wealth change: -35.3%Twynam Pastoral Co Pty LtdTotal: $60,150

Forged from a hobby farm in Picton NSW, the Twynam agribusiness empire grew to become one of the biggest landholders in Australia. The group is still held by its founders, the billionaire Kahlbetzer family, who own four Dark Companies on the Secret Rich List.

John Kahlbetzer emigrated to Australia from Germany in 1954 and began work in the steel industry. In 1969, he bought a 100ha farm in Picton NSW, which would mark the beginning of the Twynam Agricultural Group.

The ensuing decade saw Kahlbetzer purchase additional properties across NSW, most notably seven properties owned by the Naroo Pastoral Company in 1979. His son Johnny Kahlbetzer joined the business in 1991 and remains on the board today. Last year, the patriarch listed his landmark Deepdene building in Elizabeth Bay for $6.5 million.

John expanded overseas in 1982 when he created his Argentine agricultural operation LIAG, positioning his group in Buenos Aires, Argentina, with links to the tax haven of Monaco. His second son Markus manages BridgeLane, which houses Twynam’s Argentine agriculture operations as well as property and technology investments within Australia. Kahlbetzer Investments Pty Ltd, a Dark Company, is parent to the empire’s property arm.

The Group’s most significant acquisition came in 1999 when they bought Australia’s largest cotton producer and distributor at the time, Colly Cotton. The takeover bid was valued at $139 million and lent Twynam the title of Australia’s largest agricultural producer. They have also made significant investments in the mining industry both in Australia and overseas.

Twynam reached peak agribusiness operations in NSW around the early-to-mid 2000s, operating 443,275ha across 19 properties. They were also the largest irrigator in Australia, holding approximately 260,000 megalitres of river water and 38,000 megalitres of bore water (groundwater accessed by drilling).

That was until 2009 when the Rudd Government purchased 240 billion litres of water from the Group and their Dark Companies for $300 million as part of the water buy-back scheme. It raised questions regarding the high premiums received by Twynam, as well as concerns about its effect on the market as the sharply raised prices were cut back down after the sale. This rise and fall hurt other irrigation farmers “as it dramatically changed the debt-to-equity ratios of properties overnight”.

It was this sale which Barnaby Joyce then used to justify his infamous water license deal with tax haven-linked company Eastern Australia Agriculture in 2017. Under Joyce’s supervision, the Coalition paid $80 million for the licenses to a company founded by energy minister Angus Taylor. The sale was “nearly double its valuer’s central estimate”.

For Twynam, their sale to the Government in 2009 left them with numerous irrigation farms which were now reduced to dryland properties. The Group sold these assets over the coming decade, selling their last large-scale farms, the Lachlan River properties, to foreign investors in 2018 for $115 million.

Largely offsetting their agricultural operations, Twynam now focuses significantly on Venture Capital, investing in green technologies, sustainable farming and renewable projects. Their portfolio includes Opus 12, which are recycling CO2 into chemicals and fuels, animal-free egg products by ClaraFoods, Sierra Energy’s gasifier systems which generate waste into renewable energy and emission-control systems tailored towards power plants by Pacific Green Technologies.

There is no ATO tax transparency data available for Twynam. This adds a further opaqueness to the Group as their Dark Companies cover any potential tax avoidance schemes which would otherwise appear in their financial accounts.

How we compiled the Secret Rich List

What are they trying to hide? This is the driving question behind our ‘Secret Rich List’ project at Michael West Media.

Our aim is to shine the spotlight on the 1,119 large proprietary companies that continue to enjoy a privileged exemption from having to lodge financial reports to the Australian Securities and Investments Commission (ASIC).

An exemption from any new law or regulation is commonly referred to as ‘grandfathering’. In this case, the exemption from having to lodge audited accounts effectively creates two classes of Australian citizens; large proprietary companies that have to comply with government legislation, and the remaining 1,119 companies that by definition are required to do the same, yet enjoy an antiquated free pass from full public transparency.

What was issued as a “temporary measure” by the government of Paul Keating in 1995 has placed these companies above the law for more than 25 years. We believe it is in the public interest to put an end to this outdated government legislation once and for all.

Although ASIC  defines the companies enjoying the exemption as as grandfathered large proprietary companies, we prefer the term ‘Dark Companies’; it is a more fitting description of old wealth empires whose financial accounts are cloaked by this provision, shadowed from the public eye.

History behind the 1995 grandfathering exemption

This grandfathering regime was issued in response to The First Corporate Law Simplification Act 1995, a 1995 amendment to the Corporations Law at the time.

Before this amendment, whether a company had to prepare and lodge financial accounts with ASIC was determined by whether they were an exempt or non-exempt proprietary company (exempt meant the company did not have to publish accounts).

 ASIC defines exempt proprietary companies as:

“companies where there was no direct or indirect public ownership; that is, they were essentially owned by private individuals. The companies were not required to lodge financial reports where those financial reports were subject to audit and sent to members.”

 

Under the First Corporate Law Simplification Act 1995 the measure of whether a company had to lodge financial accounts with ASIC changed from the reporting entity test (exempt/non-exempt system) to what became known as the ‘small/large test’.If the company was considered a ‘large’ proprietary company, then it must lodge its accounts.

As of the law in 1995, an Australian proprietary company was ‘large’ if it satisfied two of the following three criteria:

  • consolidated gross assets of $5 million or more;
  • consolidated gross revenue of $10 million or more;
  • the company and the entities it controls (if any) have more than 50 employees at the end of the financial year.

The criteria for the small/large test has since been updated.

The new legislation meant that a significant number of previously exempt organisations now had to prepare and lodge their financial accounts.

The explanatory memorandum for the Bill notes: “To avoid disrupting established commercial arrangements, those existing exempt proprietary companies which have their annual accounts audited, which are large and which elect to continue operating under the existing rules, will not need to lodge their accounts with [ASIC].”.

Thus was born the concept of the grandfathered list - or Secret Rich List as we like to call it. In 1995, it was home to more than 2,000 large proprietary companies.

Significant Global Entities

Some 12 of the 1,119 Dark Companies are considered ‘significant global entities’ (SGE). An entity becomes an SGE if it fits at least one of the two following criteria:

  • a 'global parent entity' whose 'annual global income' is A$1 billion or more,
  • a member of a group of entities consolidated (for accounting purposes) where the global parent entity has an annual global income of A$1 billion or more.

These entities must prepare and lodge general purpose financial accounts with ASIC. This requirement is no different for the 12 SGEs on the Secret Rich List as their SGE status overrides the grandfathering exemption.

 

MWM Methodology

Using both the ASIC and Australian Electoral Commission (AEC) databases we have conducted more than 5,000 searches and counting.

Through the ASIC searches we have been able to collate the necessary information for every company on the grandfathered list, ranging from company directors, shareholders (both persons and organisations), a company’s auditor and much more. This has all been incorporated into our database, which is designed to map out these Dark Companies and tackle our driving question.

We also used the AEC database to generate an extensive list of political donations from these Dark Companies that date from the 1998-99 financial year to the present. We have designed a separate database for these figures, listing political donations from the entity itself, its directors and/or its shareholders. Each donation has been separated into recipient categories to better display the amounts funnelled to the Liberal and Labor parties and their constituencies.

The donations help indicate why the exemption, which ensures such a lack of transparency, has stood the test of time despite numerous attempts over the years from both sides of Parliament, the cross bench, the Greens, Treasury, corporate regulator ASIC and a joint parliamentary inquiry, which have all called for the exemption to be abolished. Both databases created by Michael West Media complement each other to bolster the narrative of the stories that follow.

In a similar approach to our Q.E.D. and Revolving Doors series, we will be releasing a profile each day that highlights directors of these Dark Companies, many of whom appear on the 2020 Australian Financial Review Rich List.

The ‘Secret Rich List’ project will provide considerable evidence to shore up the next attempt to repeal the grandfathering exemption, which Independent Senator Rex Patrick is scheduled to move before the Senate in early 2021.

If you have information about this or other entries in the Secret Rich List, contact us in full confidence via ProtonMail - click here.

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