ATO Interpretative Decision

ATO ID 2004/424 (Withdrawn)

Excise

• This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.
  Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of the period the Act was in force, 1 July 2003 up to and including 30 June 2012.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the mulching of vegetation in a plantation, as a step in the planting of the plantation, the 'planting of trees' for the purposes of paragraph 35(a) of the Energy Grants (Credits) Scheme 2003 (EGCSA)?

Decision

Yes. The mulching of vegetation in a plantation, as a step in the planting of the plantation, is the 'planting of trees' for the purposes of paragraph 35(a) of the EGCSA.

Facts

The client is contracted by an entity that manages plantations to mulch vegetation. The vegetation may be a mix of trees which have fallen during or as a result of a bushfire or woody shrubs. The mulched vegetation is left on the ground to provide nutrients to the soil and to assist the planting of seedlings in the plantation.

Reasons for Decision

Subsection 53 of the EGCSA provides that an entity is entitled, subject to certain prescribed conditions, to an off-road credit if they purchase diesel fuel for a use by them that qualifies, including primary production. Section 21 of the EGCSA says primary production means '...forestry.'

Section 35 of the EGCSA says:

The expression forestry means:

the planting... in a... plantation, of trees intended for felling' or...

The word 'planting' is not defined in the EGCSA. It therefore takes on its ordinary meaning. The verb 'to plant' is defined in The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd NSW as 'to put or set in the ground, as seeds, young trees, etc'. Therefore, 'planting' is the act of putting or setting seeds or young trees in the ground.

Sound silvicultural practice requires activities such as ploughing, breaking, turning, fertilising and conditioning of the soil to ensure that it is receptive to the seeds or plants when they are put into the ground.

In Taxation Determination TD 2003/12, the ATO recognises that vegetation reduction and eradication activities (to the extent that they are part of the establishment of a plantation) are activities that are seasonally dependent agronomic activities in the planting and tending of trees for felling for the purposes of the Income Tax Assessment Act 1936.

That is, sound silvicultural practice may require a time delay between activities such as ploughing etc and the physical placing of a seed or young tree in the soil. Therefore, such activities may constitute the planting of trees, even though there may not be an immediate planting, provided the activity is clearly undertaken in accordance with appropriate silvicultural practices appropriate for the type of plantation.

In this case, the client is contracted by an entity that manages plantations to mulch vegetation and the mulched timber is left on the ground to provide nutrients to the soil and to assist the planting of seedlings in the plantation.

Accordingly, the mulching, in a plantation, of vegetation such as tree debris after a bushfire or woody shrubs and allowing the mulched material to lie on the ground to prepare the soil is the necessary first step, in accordance with sound silvicultural practices, in the planting of trees for the purposes of paragraph 35(a) of the EGCSA.

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 21
   section 53
   paragraph 35(a)

Related Public Rulings (including Determinations)
Taxation Determination TD 2003/12

Other References:
The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd NSW

Keywords
Energy grants (credits) scheme
EGCS off-road
EGCS forestry
EGCS planting or tending

Business Line:  Indirect Tax

Date of publication:  21 May 2004

ISSN: 1445-2782