ECONOMIC DEVELOPMENT COMMITTEE Inquiry into the Viability of the Victorian Thoroughbred/Standardbred Breeding Industries Report on the Thoroughbred Breeding Industry ORDERED TO BE PRINTED February 2006 by Authority. Government Printer for the State of Victoria No. 182 - Session 2003-2006 Parliament of Victoria Economic Development Committee Report on the Thoroughbred Breeding Industry ISBN 0-9751357-4-0 ECONOMIC DEVELOPMENT COMMITTEE Members Mr. Tony Robinson, M.P. (Chairman) Hon. Bruce Atkinson, M.L.C. (Deputy Chairman to 17/5/05) Hon. Ron Bowden, M.L.C. (Deputy Chairman from 1/8/05) Mr. Hugh Delahunty, M.P. Mr. Brendan Jenkins, M.P. Ms Maxine Morand, M.P. Hon. Noel Pullen, M.L.C. Staff Dr. Russell Solomon, Executive Officer Ms Kirsten Newitt, Research Officer (until 10/11/05) Mr. Jonathon Gurry, Research Officer (from 5/12/05) Ms Frances Essaber, Editor Ms Andrea Agosta, Office Manager The Committee’s Address is: Level 8, 35 Spring Street MELBOURNE 3000 Telephone: (03) 9651-3592 Facsimile: (03) 9651-3691 Website: http://www.parliament.vic.gov.au/edevc i ECONOMIC DEVELOPMENT COMMITTEE FUNCTIONS OF THE ECONOMIC DEVELOPMENT COMMITTEE The Economic Development Committee is an all-party, Joint Investigatory Committee of the Parliament of Victoria established under section 5(b) of the Parliamentary Committees Act 2003. The Committee consists of seven Members of Parliament, three from the Legislative Council and four from the Legislative Assembly. The Committee carries out investigations and reports to Parliament on matters associated with economic development or industrial affairs. Section 8 of the Parliamentary Committees Act 2003 prescribes the Committee’s functions as follows: to inquire into, consider and report to the Parliament on any proposal, matter or thing connected with economic development or industrial affairs, if the Committee is required or permitted so to do by or under the Act. ii Contents Members and Staff of the Economic Development Committee ................... i Functions of the Economic Development Committee ................................. ii Terms of Reference.................................................................................. vii Glossary .................................................................................................... ix Acronyms.................................................................................................. xv Chairman’s Foreword ..............................................................................xvii Executive Summary................................................................................. xix Recommendations..................................................................................xxxi Chapter 1 INTRODUCTION........................................................................1 1.1 Background to the Inquiry ................................................................1 1.2 Scope of the Inquiry.........................................................................2 1.3 Aims of the Report on the Victorian Thoroughbred Breeding Industry.............................................................................2 1.4 Process for Gathering Evidence ......................................................3 1.5 Terminology .....................................................................................4 1.6 Constraints.......................................................................................5 Industry Snapshot # 1.................................................................................6 Chapter 2 OVERVIEW OF THE VICTORIAN THOROUGHBRED BREEDING INDUSTRY .............................................................7 2.1 Introduction ......................................................................................7 2.2 History of the Thoroughbred Breeding Industry in Victoria...............7 2.3 The Victorian Thoroughbred Breeding Industry .............................10 2.4 The Economic Contribution of the Thoroughbred Breeding Industry to the Victorian Economy .................................................11 2.5 Industry regulation and representation...........................................14 2.5.1 Key national bodies ..........................................................14 2.5.2 Key state bodies...............................................................15 2.6 Strengths and Weaknesses ...........................................................16 2.6.1 Key Strengths...................................................................17 2.6.1.1 Victorian Thoroughbred Racing........................17 2.6.1.2 Super VOBIS....................................................18 iii 2.6.2 Key Weaknesses..............................................................19 2.6.2.1 Competition with New South Wales .................19 2.6.2.2 Stallions............................................................20 2.6.2.3 Other Weaknesses...........................................21 2.7 A foundation for growth..................................................................22 Industry Snapshot # 2..............................................................................23 Chapter 3 SETTING A NEW DIRECTION ................................................25 3.1 Industry representation in Victoria .................................................25 3.2 Overseas Jurisdictions...................................................................25 3.3 The Need for a Co-ordinating Agency............................................27 3.4 VicStud Ltd ....................................................................................28 3.4.1 Functions of VicStud Ltd...................................................29 3.4.2 Marketing..........................................................................29 3.4.3 Advisory and information service......................................30 3.5 National and international forums and conferences.......................32 3.6 Staffing...........................................................................................33 3.7 The relationship between VicStud Ltd and government agencies ........................................................................................34 3.8 Funding of VicStud Ltd...................................................................35 3.9 Review of VicStud Ltd Operations .................................................37 Industry Snapshot # 3...............................................................................38 Chapter 4 INVESTMENT ENVIRONMENT AND RETURNS TO INVESTORS AND OWNERS...................................................39 4.1 Introduction ....................................................................................39 4.2 Returns to Investors and Owners ..................................................40 4.2.1 The Sales System in Australia..........................................40 4.2.2 Sales Competition ............................................................43 4.2.3 Sales and Bloodstock Code of Practice............................49 4.2.4 Marketing and export programs........................................51 4.2.4.1 Marketing..........................................................51 4.2.4.2 Export programs and issues.............................53 4.2.4.3 Export Market Development Grants .................55 4.2.4.4 The Cluster Program ........................................59 4.2.5 Prizemoney and the Incentive Scheme ............................60 4.2.5.1 VOBIS and Super VOBIS.................................60 4.2.5.2 Other incentives ...............................................66 iv 4.3 Taxation Rules...............................................................................68 4.3.1 Horse breeding provisions................................................68 4.3.2 Horse breeding as a hobby or a business ........................68 4.3.3 Primary production status.................................................70 4.3.4 Depreciation of breeding stock .........................................73 4.3.5 Other taxation issues........................................................75 4.3.5.1 Multinational studs and their taxation treatment ..........................................................75 4.4 Syndication and the Australian Securities and Investments Commission Regulations ...............................................................76 4.4.1 Types of syndication arrangements..................................77 4.4.2 Exemptions to ASIC Regulations .....................................78 4.4.3 Restrictions related to low priced racehorses ...................81 4.4.4 What is a managed investment scheme?.........................82 4.4.5 Communication of ASIC regulatory requirements ............83 4.5 Bad Debts ......................................................................................85 4.6 Concluding comments ...................................................................89 Industry Snapshot # 4...............................................................................90 Chapter 5 SKILLS TRAINING AND RESEARCH.....................................91 5.1 Introduction ....................................................................................91 5.2 Educational Providers....................................................................92 5.3 Formalised Training .......................................................................93 5.4 Demand for Victorian Graduates ...................................................96 5.5 Rural Access to Education.............................................................97