Forestry Tasmania will remain a standalone corporate entity responsible for commercial wood production as part of reforms announced today to put the Government business on a profitable and sustainable footing.

The Deputy Premier Bryan Green said FT's core role would be to manage commercial forest activities to supply Tasmania's timber industry.

Mr Green said most non-commercial functions such as the management of reserves would be transferred to separate Government agencies.

"The reality is that Forestry Tasmania in its current form is not sustainable and a restructuring of the organisation is unavoidable," Mr Green said. "The business is no longer able to fund the non-commercial activities it is required to under the current structure.

Mr Green said the Strategic Review of Forestry Tasmania by URS confirmed the business faces substantial cash losses if markets do not improve.

"These losses are predicted to be in the order of $20-25 million a year for the next five years.

"That is why we made the contingency in this year's budget to assist Forestry Tasmania should it be needed. "The status quo is not an option given the deficits being forecast for the business.

"The Government is determined to steer a responsible course through the worst downturn we have seen in the forest sector and a major part of that is making sure Forestry Tasmania remains strong and viable.

Mr Green said the restructuring would help provide certainty for Forestry Tasmania employees across the State.

"It has been a very difficult and uncertain time for employees but I assure them the best long term interests of the industry are at the heart of every decision we make.

Mr Green said the Strategic Review of the organisation recommended a new structure was needed take the business forward.

"The transition will involve senior Government officials working closely with Forestry Tasmania to determine how and when non-commercial functions should be transferred.

"The engagement with Forestry Tasmania has already begun.

"It is no secret that FT is in an extremely difficult financial position which has been highlighted by the Auditor General and the Legislative Council's inquiry into its financial performance.

"The Government cannot ignore the impact of the forest downturn which has seen half the jobs and a third of the businesses in the native forest sector disappear in recent years.

Mr Green said the restructure would reduce the level of commercial and financial risk to the Government.

"As custodian of the business we are ultimately responsible for ensuring State forests continue to be managed properly while providing a return to the State.

"As we transition to a new structure, the work Forestry Tasmania does, particularly its non-commercial activities, will be more widely recognised and appreciated by the community.

"We need to move to a resilient and robust business model as quickly as possible to provide certainty to management and employees of the business, industry, Tasmanian taxpayers and all those with an interest in the ongoing management of our State forests," Mr Green said.