Fuel Tax Ruling

FTR 2012/2

Fuel tax: fuel tax credits for taxable fuel acquired or manufactured in, or imported into, Australia for use in carrying on an enterprise involving 'forestry' as defined in section 43-75 of the Fuel Tax Act 2006

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What this Ruling is about

1. This Ruling explains an entity's^[1] entitlement to a fuel tax credit under the Fuel Tax Act 2006 (FT Act) for taxable fuel it acquires or manufactures in, or imports into, Australia to the extent that it does so for use in carrying on an enterprise, which involves activities that are within the meaning of 'forestry' in section 43-75 of the FT Act.

2. The Ruling also explains:

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the fuel tax credit system^[2] under the FT Act; and

•

the meaning of 'forestry' and related terms in section 43-75 of the FT Act. In particular, the Ruling discusses:

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the meaning of each of the activities in the definition of 'forestry' in section 43-75 of the FT Act; and

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the meaning of roads that are public roads - and discusses roads that are not public roads and forestry roads.

3. Unless otherwise stated, all legislative references in this Ruling are to the FT Act.

Definitions

4. In this Ruling, unless otherwise stated:

•

a reference to:

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'acquire taxable fuel' or 'taxable fuel acquired' is a reference to 'taxable fuel that you acquire or manufacture in, or import into, Australia';

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'diesel fuel rebate scheme' is a reference to the diesel fuel rebate scheme as provided for in section 164 of the Customs Act 1901 and section 78A of the Excise Act 1901;

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'eligible activity or activities' is a reference to a use that qualifies for the purposes of section 43-75 of the FT Act;

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'Energy Grants Act' is a reference to the Energy Grants (Credits Scheme) Act 2003;

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'energy grants scheme' is a reference to the energy grants credit scheme as provided for under the Energy Grants Act;

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'GST' is a reference to the goods and services tax;

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'GST Act' is a reference to the A New Tax System (Goods and Services Tax) Act 1999;

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'taxable fuel' is a reference to taxable fuel as defined in section 110-5 of the FT Act;

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'Transitional Act' is a reference to the Fuel Tax (Consequential and Transitional Provisions) Act 2006;

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'transitional provisions' is a reference to the relevant provisions in Schedule 3 of the Transitional Act; and

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'you' in relation to provisions of the FT Act and the Transitional Act applies to entities generally, unless its application is expressly limited;^[3] and

•

it is assumed:

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that if you are entitled to a fuel tax credit you meet the requirements that entitle you to the credit and are not disentitled by the disentitlement rules^[4] in the FT Act;

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that if an entity is carrying on an enterprise of forestry it is carrying on an enterprise^[5] in the form of a business which involve the activities that are within the meaning of forestry; and

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that if an entity is not undertaking eligible activities in forestry, that their use of taxable fuel does not satisfy any of the other circumstances giving rise to a nil carbon reduction amount.^[6]

5. In this Ruling, a reference to you being entitled to a fuel tax credit and having a nil carbon reduction amount assumes that the requirements of the FT Act (where relevant) are satisfied.

Class of entities

6. This Ruling applies to the class of entities who acquire or manufacture in, or import into, Australia, taxable fuel to the extent that they do so for use in carrying on an enterprise which involves activities that are within the meaning of 'forestry' in section 43-75.

How to read this Ruling

7. The Ruling section sets out the Commissioner's view on entitlement to fuel tax credits with a nil carbon reduction amount for taxable fuel acquired or manufactured in, or imported into, Australia for use in carrying on an enterprise that involves activities within the meaning of 'forestry'. As the references to forestry activities in section 43-75 of the FT Act are similar to those that were eligible for diesel fuel rebate under the diesel fuel rebate scheme and the energy grants credit scheme, the Commissioner considers that the views expressed in Fuel Tax Ruling FTR 2006/3 Fuel tax: fuel tax credits for taxable fuel acquired or manufactured in, or imported into, Australia for use in carrying on an enterprise involving 'forestry' as defined in section 35 of the Energy Grants (Credit) Scheme Act 2003 apply equally to the meaning of forestry in section 43-75 of the FT Act. Accordingly the views and explanation which appeared in FTR 2006/3 which was withdrawn from 1 July 2012 have been deliberately reproduced in this ruling.

8. For a more detailed analysis and explanation of the issues covered in the Rulings section, you should refer to the Explanation section in Appendix 1 of this Ruling.

Ruling

General entitlement rules for a fuel tax credit

9. You are entitled to a fuel tax credit for taxable fuel that you acquire or manufacture in, or import into, Australia^[7] to the extent that you do so for use in carrying on your enterprise.^[8]

10. However, you are only entitled to the fuel tax credit if, at the time you acquire the taxable fuel, you are registered for GST, or required to be registered for GST.^[9] This is regardless of your turnover.^[10]

11. The fuel tax credit to which you are entitled is taken into account in calculating your net fuel amount. The net fuel amount must be calculated for each tax period. If your net fuel amount is a positive figure, you must pay this amount to the Commissioner. If the net fuel amount is a negative figure, the Commissioner must pay this amount to you.

12. Taxable fuel means fuel on which customs or excise duty is payable.^[11]

13. You must be 'carrying on an enterprise' within the meaning of section 9-20 of the GST Act to be entitled to a fuel tax credit. The expression 'carrying on an enterprise' includes doing anything in the course of the commencement or termination of the enterprise.^[12]

14. The words 'to the extent that' in subsection 41-5(1) allow for apportionment between a use that entitles you to a fuel tax credit and one that does not. You can use any fair and reasonable basis for working out the amount of taxable fuel in respect of which you are entitled to a fuel tax credit.

15. The Commissioner's view is that the 'fair and reasonable' principle also applies in determining the extent of your entitlement to a fuel tax credit if the fuel is acquired for a number of uses, some of which qualify for a fuel tax credit and some of which do not.^[13]

Entitlement to fuel tax credits with a nil carbon reduction amount for fuel acquired for use 'in forestry'

16. If you carry on an enterprise involving forestry and you acquire taxable fuel for use in an activity that is within the meaning of 'forestry' in paragraphs 43-75(a) to 43-75(f) you are entitled to a fuel tax credit under section 41-5.

17. The amount of your fuel tax credit entitlement for taxable fuel acquired, from 1 July 2012, for use in forestry will have a nil carbon reduction amount applicable to it.

The form of the definition of 'forestry'

18. The use of the expressions 'means' and 'includes' in the definition of 'forestry' in section 43-75 means that the definition is an exhaustive one. Activities that are not within any one of those mentioned in paragraphs 43-75(a) to 43-75(f) are not activities in forestry.

19. To qualify as forestry, each of the activities mentioned in section 43-75 must be carried out for the purposes of a commercial undertaking^[14] to obtain timber^[15] as primary produce.^[16]

Status of contractors and subcontractors

20. A contractor is entitled to a fuel tax credit with a nil carbon reduction amount for taxable fuel they acquire for use in a forestry activity provided the activity is carried out for the purposes of a commercial undertaking to obtain timber as primary produce.

Example 1: forestry activities by a contractor and subcontractor to a sawmiller

21. Under a contract with Imillit Ltd (Imillit), Kimba Enterprises Ltd (Kimba), which carries on an enterprise as contractor in the timber industry, undertakes the felling of standing timber and transportation of the logs to Imillit's sawmill located adjacent to the forest. On occasions Kimba, with the consent of Imillit, subcontracts the transportation activity to Timbu Transporters. The transport activity is not on a public road.

22. Kimba's felling and transportation activities qualify as forestry activities even though it itself does not carry on a commercial undertaking to obtain timber as primary produce. However, its activities are undertaken for the purposes of a commercial undertaking by Imillit to obtain timber as primary produce.

23. Similarly, Timbu Transporters' transportation activity qualifies as a forestry activity as it is for the purposes of Imillit's commercial undertaking to obtain timber as primary produce.

Transporting of timber

24. A nil carbon reduction amount will be applicable if you acquire taxable fuel for use in the transporting of timber, in a forest or plantation, of felled timber from one place in the forest or plantation to another place in that forest or plantation, usually to a mill located in that forest or plantation.

25. The transport of timber includes the return journey of the transport vehicle from the mill to the loading point so it can continue to transport timber. The return journey must form part of a continuous, unbroken process of transporting timber.

Example 2: 'transporting of timber' - return journey

26. Cheryl carries on an enterprise as a transport contractor who uses a prime mover and trailer combination to carry timber logs for Bigsaw Enterprises Ltd, a sawmiller. The mill is located inside a large forest. The logs are taken from a log dump (within the forest) to the mill along a forestry road that is not a public road. Once the timber is unloaded, Cheryl drives back to the log dump to pick up more logs. When necessary during the day, Cheryl drives to the sawmill's fuel depot, located half a kilometre from the mill, to refuel before returning to the log dump.

27. As the return journey from the mill to the log dump forms part of a continuous process of transporting timber, that journey is considered to be 'transporting ... of timber'. The fact that Cheryl drives to the fuel depot to fill the truck's tank does not disqualify the journey from being in transporting of timber for the purposes of paragraph 43-75(c).

Example 3: 'transporting of timber' - not a return journey

28. Continuing Example 2, after the last load for the day, the trailer is separated and left in a secure area at the sawmill. Cheryl drives the prime mover home where it is garaged overnight. In the morning Cheryl drives to the sawmill and after hitching the trailer to the prime mover drives to the log dump to pick up the first load for the day.

29. The travel by Cheryl from the sawmill to her home and from home back to the sawmill does not constitute part of an unbroken process of transporting timber and is not an eligible activity of 'transporting of timber'.

Transporting of timber to a port

30. To qualify as a forestry activity under paragraph 43-75(e), the transporting of timber must be to a sawmill or chipmill located in Australia. The transporting of timber from a forest or plantation in which the timber is felled to a port for export to an overseas sawmill or chipmill is not a qualifying activity under this paragraph.

Example 4: transporting of timber not by road

31. Umillit Ltd (Umillit) carries on an enterprise as a sawmiller. It fells timber in a forest in a remote region in a State. Felled logs are transported on a private road by a vehicle a short distance from the coupe to the log dump next to a landing site on a river. The logs are then transported by barge along a river through the forest to Umillit's sawmill located on the coast close to the mouth of the river, which is outside the forest. The barge then returns to the site of the log dump in the forest to undertake further transporting of logs. The logs are milled at the sawmill into timber planks. The planks are then transported by trucks, with a GVM of more than 4.5 tonnes, on public roads to the nearby docks and loaded onto a ship for export.

32. The transportation of the felled logs by the truck from the coupe to the log dump and by barge to the sawmill is an activity in forestry. The return journeys of the truck from the log dump to the coupe and of the barge from the sawmill to the log dump are also qualifying uses under paragraphs 43-75(c) and 43-75(e).

33. However, when the logs have been milled into planks, the transportation of the planks for export is not an activity in 'forestry' under paragraph 43-75(e).

34. Transporting the planks to the nearby docks on public roads for export is not an eligible activity in forestry.

The milling or processing of timber

35. A nil carbon reduction amount will be applicable if you acquire taxable fuel for use in the milling or processing, in a forest or plantation, of timber felled in the forest or plantation. A nil carbon reduction amount will also be applicable if you acquire taxable fuel for use in the milling of timber at a sawmill or chipmill that is not located within the forest or plantation in which the timber was felled.

36. The milling of timber includes activities that are integral to, or necessarily incidental to, the process of milling timber. However, it does not include activities regarded as secondary manufacture.

Example 5: activities that are integral or necessarily incidental to the milling or processing of timber

37. Seesaw Mills Ltd (Seesaw) carries on an enterprise of sawmilling and operates a rotary mill in a remote forest. When logs from the forest are delivered to Seesaw's mill, they are moved by forklift to a stockpile and left to dry for a period. This drying process is necessary to make the logs suitable for debarking and sawing. Once dry the logs are moved by forklift to the area within the mill where the logs are debarked.

38. The drying process and the movement of the logs by forklift are activities necessarily incidental to the process of milling of the logs. They are activities in milling or processing of timber and are forestry activities under paragraph 43-75(c).

Example 6: 'forestry' activities and secondary processing activities

39. Sawsee Mills Enterprises (Sawsee) carries on an enterprise of sawmilling and operates a sawmill adjacent to a plantation from which it receives its timber logs for processing into planks. The planks are suitable for a variety of uses, including carpentry, building and landscaping. The processing of the timber logs necessarily includes movement of the timber logs by forklift as they go through the various stages of debarking, drying and sawing.

40. The finished timber planks are placed on pallets and moved to the dispatch bay. They are then loaded by Sawsee onto a truck operated by a road transport contractor for removal to a separate factory where they are used as inputs into secondary processes.

41. The activities at the sawmill are forestry activities up to and including the moving of the timber planks to the dispatch bay.

42. However, the loading of the planks from the dispatch bay onto the truck and its subsequent transport are not forestry activities as primary processing of the timber is completed at the point when the dressed timber is moved into the dispatch bay.

Example 7: milling or processing of timber

43. Peg Post Ltd (Peg Post) carries on an enterprise as a manufacturer of wooden clothes pegs. Peg Post grows trees in a plantation on private property close to a sawmill it operates to process timber for its purposes. The felled timber is taken from the plantation to the mill by a truck-trailer vehicle combination on a private road. Harvested timber logs are placed on a production line by a front-end grab tractor. They then pass through an integrated milling process involving:

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removal of the bark by a de-barking machine;

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the cutting of timber into lengths measuring two metres by three centimetres by three centimetres by a series of circular saws; and

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planning to obtain a smooth finish.

44. The timber at the end of this integrated process is then carried by a conveyor belt to a plant next to the sawmill where they are further trimmed, cut and shaped by a lathe to the right size and manufactured into clothes pegs.

45. The activities carried out by Peg Post up to and including the planning of the timber at the sawmill as part of the integrated milling process are eligible forestry activities. Peg Post is entitled to a fuel tax credit with a nil carbon reduction amount in respect of taxable fuel acquired for use in each of those activities This includes the diesel fuel acquired for use in the transporting of timber from the plantation to the mill and for use in the front-end grab tractor to place the felled timber onto the production line.

Example 8: milling or processing of timber

46. Fancy Floors Ltd (Fancy Floors), which carries on an enterprise of timber manufacturing, makes various timber products used in flooring. It operates a sawmill outside the plantation where the timber used in the flooring is felled.

47. Timber from the plantation is transported via a private road to the sawmill and is fed into a debarking machine. After debarking, the logs are cut to size, stacked and left to air dry. After air drying, the logs are placed in a diesel fuelled kiln to finish drying. After drying, the logs are removed from the kiln and milled into planks which are stockpiled. The planks are then processed into various flooring products.

48. The activities carried out by Fancy Floors up to and including the placing of the milled planks into stockpiles occur as part of the integrated milling process and are eligible forestry activities. Fancy Floors is entitled to a fuel tax credit with a nil carbon reduction amount in respect of taxable fuel acquired for use in each of those activities. This includes the taxable fuel acquired for use in powering the kiln and the equipment used to load the timber into the debarking machine, stack the timber for air drying, loading the air dried timber into the kiln, loading the dried timber into the sawmill and to stockpile the planks.

Taxable fuel acquired for use in propelling a vehicle on a public road

49. You are entitled to a fuel tax credit under section 41-5 for taxable fuel you acquire for use in a vehicle with a GVM greater than 4.5 tonnes, travelling on a public road.^[17]

Meaning of 'public road'

Roads that are public roads

50. For the purposes of the FT Act, the Commissioner considers that a road is a public road if:

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it is opened, declared or dedicated as a public road under a statute;

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it is vested in a government authority having statutory responsibility for the control and management of public road infrastructure; or

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it is dedicated as a public road at common law.

Example 9: a public road - a road managed by a statutory authority responsible for state highways and main roads

51. The Roads Act 1993 (NSW) is concerned with the development and maintenance of the state road network in New South Wales.

52. That Act provides that, in New South Wales, the Roads and Traffic Authority (RTA) is the roads authority for all freeways, the Minister is the roads authority for all Crown roads, and the council of a local government area is the roads authority for all public roads within its area.^[18]

53. That Act provides that the Minister may dedicate any unoccupied Crown land as a public road.^[19]

54. The RTA, through its contractors constructs a main road linking two towns in rural New South Wales. Part of the road is constructed through a state forest. The road is constructed specifically to enable the public to travel directly between the two towns. The members of the public have an unfettered right to use the road and the road is opened as a public road.

55. Toothsaw Enterprises Ltd (Toothsaw) carries out forestry activities in the state forest through which the new road is constructed. It operates a sawmill located on the inside edge of the forest. It uses the services of Lumbering Giants Ltd (Lumbering Giants) to transport the logs from the coupe to the sawmill. Lumbering Giants has a fleet of three truck trailer combination vehicles, which it uses to haul the felled timber to the sawmill. Part of this transport is on the new main road. Lumbering Giants agrees to pay a levy for the maintenance of that part of the new road that it uses for transporting logs.

56. Taxable fuel acquired by Lumbering Giants for use in propelling its vehicles on this road is not acquired for use in forestry - it is acquired for use in propelling a vehicle on a public road.

Roads that are not public roads

57. The Commissioner considers that the following are not public roads for the purposes of the FT Act:

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a road constructed or maintained under a statutory regime by a public authority that is not an authority responsible for the provision of road transport infrastructure, in circumstances where the statutory regime provides that public use of, or access to, the road is subordinate to the primary objects of the statutory regime;

•

a forestry road; or

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a road that has not been dedicated as a public road over privately owned land.

Example 10: not a public road

58. A State Water Management Authority constructs and maintains a road leading to a dam (dam road) in a remote part of the State. The road is constructed to allow access by the authority to the dam for service and maintenance purposes. However, the authority permits members of the public to have limited access to the road for the purposes of accessing a popular hiking area near the dam.

59. Signs at the start of the road and along it indicate that the road is not a public road and is liable to closure without notice.

60. The water authority is not responsible for the provision of road and transport infrastructure. Any public use of the dam road is subordinate to the primary purpose of making and maintaining the road, which is to assist the water management authority in its water management role. The road is not a public road.

Forestry roads

61. For the purposes of section 43-75, a forestry road is a road within a forest or plantation which is constructed and maintained primarily and principally for the purposes of providing access to an area to facilitate forestry activities (for example, to facilitate trees to be planted or tended in the area, or timber felled in the area to be removed) and for related forestry management activities.^[20]

Example 11: not a public road - forestry roads

62. Following on from Example 10, the transporting of timber logs from the coupe to the main road is on a forestry road constructed by the New South Wales Forestry Commission (state forestry road) and transport from the main road to the saw mill is on a road constructed and maintained by Toothsaw (Toothsaw forestry road).

63. Members of the public are allowed to use the state forestry road to access a popular camping and hiking area in the forest. However, signs at the entrance to the road make it clear that the road is a forestry road, which is used for the transporting of timber and may be closed to members of the public without notice.

64. Toothsaw and Lumbering Giants both pay a levy to the State Forestry Commission for the maintenance of the state forestry road. Toothsaw is solely responsible for the maintenance of the Toothsaw forestry road. Members of the public are not permitted to use this road.

65. The state forestry road and the Toothsaw forestry road are not public roads. The roads are not declared, dedicated or opened as public roads and, although members of the public can access the state forestry road, that access is fettered; access can be denied to them at any time at the discretion of the State Forestry Commission.

66. Taxable fuel acquired for use in propelling vehicles on these forestry roads are for use in forestry.

Conversion of a forestry road to a public road

67. A forestry road becomes a public road when it is dedicated as a public road. This usually occurs when responsibility for the forestry road passes to a local government authority, or state or territory government authority, having responsibility for maintenance of highways, main roads or local roads.

Date of effect

68. This Ruling applies from 1 July 2012.

69. However, the Ruling does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Ruling (see paragraphs 75 to 76 of Taxation Ruling TR 2006/10).

Commissioner of Taxation
3 October 2012

Appendix 1 - Explanation

General entitlement rules for a fuel tax credit

70. You are entitled to a fuel tax credit^[21] for taxable fuel that you acquire or manufacture in, or import into, Australia to the extent that you do so for use in carrying on your enterprise.^[22]

71. However, you are only entitled to the fuel tax credit if, at the time you acquire the taxable fuel, you are registered for GST, or required to be registered for GST.^[23] This is regardless of your turnover.

72. You must be 'carrying on an enterprise' within the meaning of section 9-20 of the GST Act to be able to claim a fuel tax credit. The expression 'carrying on an enterprise' includes doing anything in the course of the commencement or termination of the enterprise.

73. Fuel tax^[24] means duty that is payable on fuel under the Excise Act 1901 or the Customs Act 1901 and the respective Tariff Acts,^[25] other than any duty that is expressed as a percentage of the value of fuel for the purposes of section 9 of the Customs Tariff Act 1995.

74. Taxable fuel means fuel on which customs or excise duty is payable.^[26]

75. You will not be considered to have used the taxable fuel if you sell the taxable fuel to another entity.^[27]

76. You only need to acquire taxable fuel with the intention of using it for an eligible purpose to become entitled to a fuel tax credit. It is not necessary for the taxable fuel to have been used by you at the time you make the claim. However, if you acquire the taxable fuel with the intention of using it for a particular purpose but subsequently use the taxable fuel for a different purpose and the amount of fuel tax credit worked out on the basis of the intended use is different from the amount you are actually entitled to work out on the basis of actual use, you will have a fuel tax adjustment.^[28]

77. Under the FT Act, you are required to calculate your net fuel amount^[29] for each tax period.^[30] Your net fuel amount is worked out using the formula^[31] set out in subsection 60-5(1). The net fuel amount is claimed on your Business Activity Statement (BAS). If the net fuel amount is positive, you must pay that amount to the Commissioner. If the net fuel amount is negative, the Commissioner must pay that amount to you. The attribution rules in Division 65 determine the tax period to which your fuel tax credit is attributed.^[32]

General principles of apportionment

78. The words 'to the extent that' in subsection 41-5(1) allow for apportionment between a use that entitles you to a fuel tax credit and one that does not, and between uses that give rise to different rates of fuel tax credit. You can use any apportionment method that is fair and reasonable in your circumstances to determine the fuel tax credit that is available for the taxable fuel that you acquire.^[33]

Entitlement to fuel tax credits with a nil carbon reduction amount for taxable fuel acquired from 1 July 2012 for use in forestry

79. You are entitled to a fuel tax credit with a nil carbon reduction amount for taxable fuel you acquire for use or used 'in forestry'. The expression 'forestry' is defined in section 43-75.

80. In the context of the phrase 'in forestry' in paragraph 43-8(4)(b), the preposition 'in' means 'in the course of' or 'in the process or act of'. Therefore, if an activity can be said to have taken place 'in the course of' forestry, it can be concluded that it takes place 'in' forestry. For your carbon reduction amount to be nil under paragraph 43-8(4)(b), your activities must take place 'in' forestry.

81. In Chief Executive Officer of Customs v. WMC Resources Ltd (as agent for East Spar Alliance),^[34] Nicholson J, stated:

The word 'in' as it appears in par (a) of the definition of 'mining operations' is to be understood in this context as 'inclusion within, or occurrence during the course of'...

82. The Commissioner considers that the following three criteria may be relevant in determining if an activity takes place 'in the course of' forestry.^[35] These are:

(i)

a causal link exists - in other words, a certain activity is functionally integrated with forestry, thereby forming an essential part of it;

(ii)

a spatial link exists - meaning that an activity takes place in an area set aside or occupied for forestry; and

(iii)

a temporal link exists - the activity takes place in a timely fashion, not prior to, or after the completion of, the forestry activity.

83. The relevance or weighting afforded to these criteria will vary depending on the facts in each case.

The form of the definition of 'forestry': means and includes

84. The definition of 'forestry' in section 43-75 consists of two parts:

(i)

section 43-75, paragraphs (a) and (b ): 'forestry' means the planting and tending of trees intended for felling, and the thinning or felling of standing timber; when these activities are undertaken in a forest or plantation; and

(ii)

section 43-75, paragraphs (c) to (f ): 'forestry' includes a number of specific activities.

85. The use of the form 'means ... and includes' in section 43-75 means that the definition is an exhaustive definition. Paragraphs 43-75(a) and 43-75(b) contain the central features of 'forestry', which are then expanded by the specific activities listed in paragraphs 43-75(c) to 43-75(f). If an activity is within one of those mentioned in paragraphs 43-75(a) to 43-75(f), you are entitled to a fuel tax credit with a nil carbon reduction amount if you acquire taxable fuel for use in that activity.

86. The form of the definition of 'forestry': means ... and includes, and the activities that fall within that definition are the same as that used in the definition of forestry in the diesel fuel rebate scheme.^[36] Decisions of the Courts and the Administrative Appeals Tribunal (AAT) in relation to the diesel fuel rebate scheme are, in the Commissioner's view, relevant to the interpretation of section 43-75.

87. The use of the expressions, 'means' and 'includes' in the definition of 'forestry' in section 43-75 means that the definition is an exhaustive definition. Paragraphs 43-75(c) to 43-75(f) do not provide an exhaustive list of eligible activities. Rather, they add to the list of eligible activities in paragraphs 43-75(a) and 43-75(b).

88. Activities that are not within any one of paragraphs 43-75(a) to 43-75(f) are not forestry activities for the purposes of the fuel tax credit scheme.

Status of contractors and subcontractors

89. To be entitled to a fuel tax credit with a nil carbon reduction amount for forestry, activity determines eligibility, rather than whether your principal business is forestry.^[37]

90. Unless otherwise specified, if you undertake a forestry activity for the purposes of a commercial undertaking to obtain timber^[38] as primary produce, you are entitled to a fuel tax credit with a nil carbon reduction amount if you acquire taxable fuel for use in that activity. This includes forestry activities carried out by you as a contractor contracted by the entity that carries on the commercial undertaking or by you as a subcontractor, even if those activities only form a part of the overall commercial process of obtaining timber as primary produce.^[39]

Activities 'in forestry' carried out for commercial purposes

91. Unlike the definitions of 'agriculture' in section 43-15, and 'fishing operations' in section 43-70, the definition of forestry in section 43-75 has no specific requirement that the activities outlined in the section be carried on for the purposes of a business.^[40]

92. However, the Commissioner considers that, as section 43-75 is intended to reflect the operation of the forestry provisions under the energy grants scheme where forestry was a subset of primary production, the forestry activities must be carried out for the purposes of a commercial undertaking to obtain primary produce for the purposes of Subdivision 43-B. In the case of forestry, the primary produce is timber.^[41] The Commissioner's view is that the activities mentioned in each of the paragraphs in section 43-75 describe the processes necessary, or that assist, in the obtaining of timber as primary produce.

93. The Explanatory Memorandum to the Diesel Fuel Taxes Legislation Amendment Bill 1982 supports the Commissioner's view. The Diesel Fuel Taxes Legislation Amendment Act 1982 introduced the diesel fuel rebate scheme into the Customs Act and the Excise Act. The definition of forestry introduced by that Act was similar to the definition of forestry in section 43-75 of the FT Act.

94. That Explanatory Memorandum stated that the package was designed to 'introduce ... a new system providing for rebates of duty paid in diesel fuel used for 'off-road' purposes by persons engaged in the agriculture, mining, forestry and fishing industries'. The measures were intended to encourage the primary industries to which they applied.

95. 'Primary industry' is defined as 'any industry such as dairy farming, forestry, mining etc., which is involved in the growing, producing, extracting, etc., of natural resources.'^[42]

96. The references to 'industries' in that Explanatory Memorandum confirms a legislative intent to confine eligibility for the diesel fuel rebate under the diesel fuel rebate scheme to those that engaged in primary production as a commercial or business enterprise.

97. As the forestry activities in section 43-75 are similar to those that were eligible for diesel fuel rebate under the diesel fuel rebate scheme,^[43] the Commissioner considers that the comments made in the Explanatory Memorandum to the Diesel Fuel Taxes Legislation Amendment Bill 1982 apply equally to the meaning of forestry in section 43-75.

98. The Commissioner's view is supported by comments made by the AAT in Re City of Nunawading and Comptroller-General of Customs.^[44] Although, in that case, the AAT was dealing with the meaning of agriculture and horticulture in subsection 164(7) of the Customs Act, prior to the 1995 amendments to that Act, in relation to the definition of forestry,^[45] it observed that:

Where trees are intended for felling then presumably there is both a commercial aspect and a 'product' or 'crop'. We are not so clear that this is always the case when thinning or felling occurs in a forest or plantation of standing timber.

Presumably, thinning or felling of that type may occur on occasion for conservation and environmental purposes rather than for the purpose of retrieval of the timber for itself.^[46]

99. In relation to horticulture, the AAT, after examining the context in which the word was used, and its ordinary and statutory meaning, concluded:

Looking at the context, we consider that the word 'horticulture', when used in section 164, is not limited to those activities specified in paragraphs (a), (b) and (c) of the definition but that to come within the meaning of horticulture in the Act, an activity must relate in some way to an aspect of primary production conducted as a commercial or business enterprise.^[47]

100. The Commissioner considers that as the definition of forestry in section 43-75 is in identical terms to that in the diesel fuel rebate scheme and then the energy grants scheme, a similar approach is appropriate to the activities set out in section 43-75. In the Commissioner's view, those activities must be carried out as part of a commercial undertaking^[48] to obtain timber^[49] as primary produce.

Activities that are 'forestry'

101. Paragraphs 43-75(a) and 43-75(b) contain the central or core forestry activities. The activities outlined in these paragraphs are:

•

the planting or tending, in a forest or plantation, of trees intended for felling (paragraph 43-75(a)); and

•

the thinning or felling, in a forest or plantation, of standing timber (paragraph 43-75(b)).

102. Paragraphs 43-75(c) to 43-75(f) expand the meaning of 'forestry' by including specific activities that are undertaken for the purposes of obtaining timber as primary produce. These activities are:

•

the transporting, within a forest or plantation of timber felled in the forest or plantation;

•

the milling or processing within a forest or plantation of timber felled within the forest or plantation;

•

the transporting of felled timber from the forest or plantation where it was felled to a sawmill or chipmill, located outside that forest or plantation;

•

the milling of timber at a sawmill or chipmill that is not situated in the forest or plantation in which the timber was felled; and

•

the making and maintaining, in a forest or plantation where trees are planted or tended or where standing timber is thinned or felled, of a road that is integral to the forestry activities mentioned in paragraphs 43-75(a), 43-75(b) and 43-75(c).

Planting or tending of trees

103. The definition of 'forestry' in section 43-75 states in part:

The expression forestry means:

(a)

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

104. A nil carbon reduction amount will be applicable if you acquire taxable fuel for use in the planting or tending, in a forest or plantation, of trees intended for felling. The activity must be carried out as part of a commercial undertaking to obtain timber as a primary produce.

105. The words 'planting', 'tending', 'forest', and 'plantation' and 'felling' are not defined in the FT Act. They therefore take their ordinary meanings.

Planting of trees

106. The verb 'to plant' is defined as 'to put or set in the ground, as seeds, young trees, etc'.^[50] 'Planting of trees' is the act of putting or setting seeds or young trees in the ground.

107. In those cases where soil is ploughed, broken or turned, then fertilised or conditioned, and then afterwards seeds or seedlings, are placed in the soil as part of an integrated process, 'planting' includes the activities of ploughing, breaking or turning of the soil, the fertilisation or conditioning of the soil and the placing of the seeds or seedlings into the ground. Having regard to the three criteria mentioned in paragraph 82 of this Ruling, the Commissioner considers that all of these activities take place 'in' the planting of trees.

108. In relation to the temporal link referred to in paragraph 82 of this Ruling, the Commissioner recognises that activities performed in relation to planting trees in a plantation are seasonally dependent activities.^[51] Where best forest practice dictates particular seasonal conditions for optimal planting of trees intended for felling, the elapse of a reasonable length of time, determined in accordance with those forestry practices, between ripping and other soil preparation activities and subsequent planting of seedlings will not, of itself, sever the temporal connection.

109. The 'planting of trees' also includes planting after harvesting an area in a forest or plantation as well as the planting of trees in a new plantation. Planting does not include activities such as the felling of trees, clearing of scrub, removal of stones and other actions undertaken in land clearing for the purposes of establishing a new plantation.

Tending of trees

110. The verb 'to tend' is defined as:

1 . to attend to by work or services, care etc: to tend a fire. 2 . to look after; watch over and care for; minister to or wait on with service.^[52]

The 'tending of trees' means the undertaking of activities to ensure the survival of the trees or to enhance their growth, quality and vigour. 'Tending of trees' includes:

•

fertilising after planting;

•

spraying trees against pests and diseases;

•

eliminating weeds;

•

fire protection measures; and

•

watering.

The meaning of 'forest' and 'plantation'

111. The terms 'forest' and 'plantation' in section 43-75 are not defined in the FT Act and are to be given their ordinary meaning having regard to their statutory context.^[53]

112. The ordinary meaning of the term 'forest' is:

1 . an area of bushland in which the trees grow to great stature. 2 . a tract of land on which trees are cultivated or have been cultivated; 'a large tract of land covered with trees.^[54]

113. What is a forest is a question of fact and degree to be determined having regard to a number of factors including, the area of land on which trees are growing, its size, the use of the land on which the trees are growing, the activity or activities carried on in the area, the size of the canopy and the nature of the trees growing on it.

114. The Commissioner considers that the National Forest Inventory's definition of forest, which is:

... an area, incorporating all living and non-living components, that is dominated by trees having usually a single stem and a mature or potentially mature stand height exceeding 2 metres and with existing or potential crown cover of overstorey strata about equal to or greater than 20 per cent.^[55]

is an apt definition of 'forest' for the purposes of section 43-75.

115. The fact that, at a particular time, the area of land normally regarded as a forest does not have any trees on it (for example, as a consequence of a bush fire, or if trees have been felled for timber in the area and it is being replanted with trees for later felling) does not prevent the area from being regarded as a forest if it is left for the regeneration of trees.

116. However, not every area of land covered with trees is a forest. Having regard to the factors mentioned in paragraph 82 of this Ruling, the following are examples of what is not a 'forest' for the purposes of section 43-75:

•

a group of trees on a farm to provide shelter for farm animals;

•

a group of trees growing in a suburban park for recreational or ornamental purposes; and

•

a group of trees growing on a golf course to provide an obstacle for golfers.

117. The term 'plantation' is relevantly defined in the Macquarie Dictionary^[56] as:

2 . a group of planted trees or plants.

In the context of the definition of 'forestry', a plantation is a group of planted trees, grown specifically for harvesting as timber.

118. Modern enterprises involved in felling standing timber are required, under Commonwealth/State Regional Forest Agreements to prepare, and operate within, a formal forest management plan. If a forest management plan applies to an area on which trees are either naturally growing or are planted specifically for harvesting as timber, the place is taken to be a forest or plantation for the purposes of section 43-75.

119. Planting or tending of trees does not include the delivery to, and unloading of seedlings, fertilisers and pesticides in, the forest or plantation. Such activities are considered to take place prior to planting, and are therefore not 'in' forestry.

120. In Australian National Railways Commission v. Collector of Customs SA,^[57] Davies J dismissed the appeal against the refusal of diesel fuel rebate for fuel used in the transportation of fertiliser. In his decision, he said:

The diesel fuel rebate looks to operations within a narrower compass than the operations in respect of which the applicant's claims in this respect were made. The rebate for primary production is concerned with production of primary produce, not with the manufacture and wholesale distribution of superphosphate or with the marketing of primary produce once grown and harvested.^[58]

Intended for felling

121. The word 'to fell' is defined as 'to cause to fall, knock, strike, or cut down'.^[59]

122. The Commissioner considers that, for an activity to be a forestry activity under paragraph 43-75(a), there must be an intention to harvest the timber from the trees planted or tended. The intention must be present at the time the trees are planted (if the trees are planted) and during their tending.

123. The planting or tending of trees in a forest or plantation for a purpose other than for felling, for example, for ecological conservation, is not a forestry activity under paragraph 43-75(a). These activities are not for the purposes of a commercial undertaking to obtain timber as a primary produce.

Thinning or felling of standing timber

124. The definition of 'forestry' in section 43-75 states in part:

The expression forestry means:

(b)

the thinning or felling, in a forest or plantation, of standing timber.

125. A nil carbon reduction amount will be applicable if you acquire taxable fuel for use in the thinning or felling of standing timber in a forest or plantation. The activity must be carried out as part of a commercial undertaking to obtain timber as a primary produce.

126. Thinning refers both to the removal of dead, dying and suppressed trees (known as 'thinning to waste') and also to the removal of tree trunks or other parts of a tree for sale or use in manufacture.

What is timber?

127. The word 'timber' has as its ordinary meaning:

1 . wood, especially when suitable for building houses, ships etc., or for use in carpentry, joinery, etc. 2 . the wood of growing trees suitable for structural uses. 3 . the trees themselves.^[60]

128. The term 'timber' embraces trees and constituent parts of trees which are intended for further processing and consumption.^[61] It is not limited to sawlogs, but includes the trunk, branches, bark or any other part of the tree with a commercial value.

129. The term 'standing timber' in paragraph 43-75(b) refers to trees in their entirety prior to being felled. The term 'timber' is not limited to any particular component of the tree and does not exclude any part of the tree.^[62]

130. In the context of forestry, the term 'timber' is applied throughout the process of further reduction in size and shape up to the point immediately before the basic constituent material, in reduced or separated form, is subjected to a secondary process or treatment.^[63] The determination of whether something is timber for the purposes of section 43-75 requires a careful examination of the processes that it undergoes, and whether it is produced by the operation of saws at a mill.

131. Wood which has been milled or processed into planks, and which is suitable for a variety of structural or carpentry uses, is 'timber' for the purposes of section 43-75, as it is not considered to have been subject to a secondary process or treatment, even where the timber has been smoothed or 'dressed'.

132. However, wood, which has been shaped specifically for use in secondary manufacture, for example, wood shaped into skirting boards, is no longer 'timber' for the purposes of section 43-75 as it is the product of a process undertaken after primary production has ceased. Wood, which is shaped, moulded or cut to size specifically for a particular purpose has been subject to a secondary process or treatment. Examples of wood that has been subject to secondary processing are posts, fence pickets, 'tongue and grooved' flooring and architrave mouldings as well as plywood, which involves the gluing together of thin sheets of wood under pressure.

Felling of timber

133. 'Felling'^[64] of standing timber includes the preparation of felled trees to enable them to be moved, such as the removal of lateral growth and cutting into manageable lengths.

134. The felling of standing timber by, or on behalf of, an electricity authority within an electricity transmission line easement is not a forestry activity. In these cases, felling is undertaken for the purposes of safety control and access for repairs and maintenance and not for the purposes of a commercial or business enterprise to obtain timber as a primary produce.

Activities that are included in 'forestry'

135. The definition of 'forestry' in section 43-75 states in part:

The expression forestry means:

...and includes:

(c)

the transporting, milling or processing, in a forest or plantation, of timber felled in the forest or plantation; or

(d)

the milling of timber at a sawmill or chipmill that is not situated in the forest or plantation in which the timber was felled; or

(e)

if timber is milled at a sawmill or chipmill that is not situated in the forest or plantation in which the timber was felled-the transporting of the timber from the forest or plantation in which it was felled to the sawmill or chipmill...

Transporting, milling or processing of timber

Transporting of timber in a forest or plantation

136. A nil carbon reduction amount will be applicable if you acquire taxable fuel for use in the transporting, in a forest or plantation, of timber felled in the forest or plantation.

137. The term 'transporting' is not defined in the FT Act and therefore, in the context of paragraph 43-75(c), takes its ordinary meaning, of 'carrying or conveying from one place to another'.^[65] 'Transporting' for the purpose of paragraph 43-75(c) is not limited to transporting by road.^[66]

138. The expression 'transporting ... of timber' in paragraph 43-75(c) refers to the conveying or carrying, in a forest or plantation, of felled timber from one place in the forest or plantation where it was felled to another place in that forest or plantation, usually to a mill located in that forest or plantation. To qualify as an eligible activity, the transport must be undertaken within the forest or plantation in which the timber is felled.

139. Transporting of timber includes the carrying or conveying by the entity that felled the timber from the place where it is felled in the forest or plantation to a delivery point (a loading point or 'log dump') in that forest or plantation from which the timber is to be transported to a sawmill or chipmill for milling or processing.

140. The 'transporting ... of timber' in paragraph 43-75(c) also includes the return journey of the transport vehicle after the felled timber has been delivered to a sawmill or chipmill or log dump situated within the forest or plantation back to the loading point so it can continue to transport timber. For a return journey to be part of the 'transporting... of timber', the return journey must form part of a continuous, unbroken process of transporting timber. Short breaks to refuel the vehicle or to allow the driver to take a lunch break or mandatory rest breaks do not prevent the return journey from forming part of a continuous unbroken process of transporting timber.

141. The 'transporting of timber' in paragraph 43-75(c) on a public road is not an activity in forestry.^[67]

Transporting of felled timber to a sawmill or chipmill situated outside the forest or plantation

142. A nil carbon reduction amount will be applicable if you acquire taxable fuel for use in the transporting of timber from the forest or plantation, in which it was felled, to a sawmill or chipmill situated outside the forest or plantation.^[68] The purpose of the journey so undertaken must be to transport timber for its milling at a sawmill, or chipmill, located outside the forest in which the timber was felled.

143. The 'transporting of the timber' in paragraph 43-75(e) includes the return journey of the transport vehicle from the sawmill or chipmill back to the forest or plantation so that it can continue transporting timber from the forest or plantation to the sawmill or chipmill.^[69]

144. For the purposes of paragraph 43-75(e), if the transporting of timber to a sawmill or chipmill is undertaken in stages, then some or all of the stages of the journey may be a qualifying use under paragraph 43-75(e).

Transporting of timber to a port for export

145. If, after felling, timber is taken to a port for export to a sawmill or chipmill located outside Australia, the Commissioner takes the view that the transport of the timber to the port does not qualify as a forestry activity under paragraph 43-75(e). The Commissioner considers that, for the purposes of that paragraph, the sawmill or chipmill must be located in Australia.

146. The decision of the full Federal Court in State Rail Authority of NSW v. Collector of Customs^[70] (SRA) supports the Commissioner's view that the transport of timber from a forest or plantation to a port for export to an overseas sawmill or chipmill is not a qualifying activity under paragraph 43-75(e).

147. In that case, the full Federal Court considered an application under the 'mining operations' category of the diesel fuel rebate scheme. The claimant sought the diesel fuel rebate for transportation of minerals from the mining site to a port, where the minerals were loaded onto ships for beneficiation overseas.

148. The full Federal Court held that operations for recovery of minerals, including any beneficiation, must take place in Australia. In that case, as beneficiation did not take place in Australia, the fuel was not purchased for use in mining operations as defined in subsection 164(7) of the Customs Act. The Court (and the AAT) relied on paragraph 21(1)(b) of the Acts Interpretation Act 1901 in coming to its conclusion.

149. In reaching its decision the full Court said:

As has been noted, it is submitted on behalf of SRA that s 21 of the Acts Interpretation Act should have been applied to the element of transportation in s 164(7)(d) rather than applied to the location of the place where the beneficiation of the minerals is carried out. We have difficulty in accepting this analysis.

Once it is concluded that the relevant subject matter of the legislation is the recovery of minerals, it must follow that, in any but a special case (such as perhaps might be involved in mining in or near Australian Territorial waters), in order to qualify for a rebate, the operations for the recovery of the minerals, including any beneficiation, must take place in Australia.^[71]

150. Paragraph 21(1)(b) of the Acts Interpretation Act 1901^[72] provides:

In any Act, unless the contrary intention appears:

(b)

references to localities jurisdictions and other matters and things shall be construed as references to such localities jurisdictions and other matters and things in and of the Commonwealth.

151. The jurisdictional limit placed on the activity considered in SRA applies equally to activities in forestry under the FT Act. The Commissioner considers that paragraph 21(b) of the Acts Interpretation Act 1901 applies equally to the operation of paragraph 43-75(e). The sawmill or chipmill to which timber is transported are 'things' that must be located in Australia.

152. If timber is felled for export, the primary production activity ceases when the timber is felled and placed in the log dumps ready for transport to a port for export.

153. If the felled timber is not placed in log dumps ready for transport, but is loaded directly from the floor of the forest coupe, for transport to a port for export, the primary production activity ceases when the timber has been felled.

154. Once the primary production activity ceases, the subsequent activity of transporting the logs to a port is not a forestry activity within paragraph 43-75(e).^[73]

155. The 'transporting of the timber' in paragraph 43-75(e) on a public road is not an activity in forestry.^[74] In addition, the transporting of timber from the sawmill, or chipmill, subsequent to milling or processing is not a forestry activity as this transport occurs after primary production is complete. This transport is not covered by paragraph 43-75(c), nor by paragraph 43-75(e).^[75]

Milling or processing of timber

156. A nil carbon reduction amount will be applicable if you acquire taxable fuel for use in the milling or processing, in a forest or plantation, of timber felled in the forest or plantation.^[76]

157. Under paragraph 43-75(c), the 'milling or processing' of timber felled in a forest or plantation is a forestry activity only if the milling or processing is in the same forest or plantation in which the timber is felled.

158. A nil carbon reduction amount will be applicable if you acquire taxable fuel for use in the milling of timber at a sawmill or chipmill that is not located in the forest or plantation in which the timber was felled.^[77]

159. The terms 'mill', 'sawmill' and 'chipmill' are not defined in the FT Act, and have no particular trade or industry meanings.^[78] They therefore take their ordinary meanings.

Mill

160. The term 'mill' is a term of wide meaning. Its relevant ordinary meaning is:

1 . a building or establishment fitted with machinery, in which any of various mechanical operations or forms of manufacture is carried on, especially the spinning or weaving of cotton or wool... 5 . a machine which does its work by rotary motion, as one used by a lapidary for cutting and polishing precious stones.^[79]

161. A machine, which operates by rotary action, is accepted as falling within the ordinary concept of a mill.^[80] Machinery which does not work by rotary action is not in itself a 'mill'. For example:

•

log splitters, which use hydraulically powered rams to push timber onto fixed blades, which split the wood into smaller pieces; or

•

veneer slicing machines in which the timber is attached to a moveable carriage and drawn across a fixed blade to produce veneer strips.

are not in themselves 'mills'.

162. 'Milling of timber' is undertaken by subjecting timber to the operation of a rotary mill for the purpose of reducing the timber in size and shape.

163. It is not necessary that, to be a mill, the particular operation be of a certain size or take a particular standard form. For example, the fact that a machine is designed to be mobile does not deprive it of the character of being a 'mill'.^[81] In TJ Depiazzi and Sons v. Collector of Customs,^[82] the AAT stated:

A machine which mills must be a mill. There is no statutory prescription in the s. 164(7) definition of 'forestry' which requires milling to take place in a building. It is not that specific. A mill can be either fixed and housed in a building or it can be moveable, designed to function at different locations. The latter is nonetheless a mill. The emphasis is on function rather than the environment in which the function occurs. The processes of saw milling and chip milling are capable of technological advance and adaptation and what might be classically regarded as a saw mill or chip mill at one point of time may be overtaken by an operation employing a more advanced method of processing at a later time.^[83]

164. In the making of matches, the debarking and sawing of logs into billets was held to constitute the 'milling of timber', as was the peeling of match veneer sheets off the billets by means of a rotary veneering machine. However, in the next stage of the production line, the chopping of the veneer sheets into splints was considered unlikely to be 'the milling or processing of timber' as that process was a secondary treatment and not a process of primary production.^[84]

165. The Commissioner considers that the milling of timber is not limited to the actual subjection of the timber to the sawing or chipping activity at a mill, but it includes activities that are integral to, or necessarily incidental to, the process of milling timber. However it does not include activities regarded as secondary manufacture.

166. The term 'processing' in paragraph 43-75(c) is not defined. It, therefore, takes its ordinary meaning. The Macquarie Dictionary^[85] relevantly defines the verb 'process' as:

•

'to treat or prepare by some particular process, as in manufacturing;' or

•

'to convert (an agricultural commodity) into marketable form by some special process'.^[86]

167. The Commissioner considers that the term 'processing ... of timber' in paragraph 43-75(c) refers to the treatment or preparation of the felled timber by the use of any process. It includes the preparation of the felled timber for pulping. The processing of timber is a qualifying use only to the extent that the processing is for the purpose of a commercial undertaking to obtain timber as a primary produce. Secondary processing to convert timber for specific uses is not a qualifying forestry activity under this paragraph.

What is a sawmill?

168. A 'sawmill' is a mill in which the sawing of timber is the main or predominant process performed.^[87]

169. In Wesfi Pty Ltd v. Collector of Customs Western Australia,^[88] the AAT referred to the Shorter Oxford English Dictionary meaning of the term 'sawmill', which was:

A factory in which wood is sawn into planks or boards by machinery (now usu. propelled by steam or electricity)

and said:

We understand a sawmill to be a mill in which wood is converted from one form to another by means of saws. That is not to say that a sawmill may not use other machinery additionally to convert timber into a required form or to dry timber or for like associated purposes; but it is the saws which give to the mill the character of a sawmill. ... The element 'saw' characterises a mill as a mill in which timber is sawn.^[89]

170. A sawmill includes a rotary peel veneer plant. A rotary peel veneer plant produces timber veneer by making billets into perfect cylinders. The logs are then mounted centrally on a lathe and rotated against a razor sharp cutting blade.

171. As the timber is converted from one form to another, the rotary peel veneer plant will be a sawmill if the conversion is undertaken by means of a saw.

172. A 'saw' is defined in The Macquarie Dictionary^[90] as:

1 . a tool or device for cutting, typically a thin blade of metal with a series of sharp teeth, 2 . any similar tool or device, as a rotating disc in which a sharp continuous edge replaces the teeth.

173. As the blade of the rotary peel machine has a sharp continuous edge which cuts the timber, the machine is within the ordinary meaning of a 'saw'. Consequently, a rotary veneer peel plant is a 'sawmill'.

What is a chipmill?

174. A 'chipmill' is a mill at which the 'chipping' of timber or parts of timber occurs. A mill, which engages in a process of milling involving a substantial, though not necessarily predominant, proportion of chipping, is a chipmill.^[91]

175. 'Chipping' refers to one of the reduction processes through which tree parts and residue are broken down to a state where they become material capable of use in other productive activities.^[92] Examples of end products of chipping in chipmills are wood chips for use in making cardboard or chipboard.

176. Machines, which perform the processing of raw materials received from local sawmills into smaller pieces by the action of hammers, which operated by rotary motion, have been held to be chipmills.^[93]

Making and maintaining roads

177. The definition of 'forestry' in section 43-75 states in part:

The expression forestry means:

... and includes:

(f)

the making and maintaining in a forest or plantation referred to in paragraph (a) or (b) of a road that is integral to the activities referred to in paragraph (a), (b) or (c).

178. A nil carbon reduction amount will be applicable if you acquire taxable fuel for use in the making and maintaining of a road:

•

in a forest or plantation in which trees intended for felling are planted or tended;

•

in a forest or plantation in which standing timber is thinned or felled; and

•

that is integral to the activities of planting or tending of trees intended for felling, the thinning or felling of standing timber in that forest or plantation, or to the transporting, milling or processing, in the forest or plantation, of timber felled in that forest or plantation.

Road

179. The word 'road' is not defined in the FT Act. Its relevant ordinary meanings are:

1 . a way, usually open to the public for the passage of vehicles, persons, and animals. 2 . any street so called. 3 . the track on which vehicles, etc., pass, as opposed to the pavement.^[94]

180. The Commissioner considers that for the purposes of paragraph 43-75(f), 'road' includes the infrastructure that is necessary to and forms a fundamental part of the road network within the forest, such as culverts, bridges and hardstand areas (also known as log dumps).

181. Other infrastructure such as fuel dumps, quarries and pits which may be connected to the road network within the forest are not 'roads' for the purposes of paragraph 43-75(f) as the Commissioner does not consider that these form part of the road network.

'Making and maintaining'

182. The term 'and' in the phrase 'making and maintaining' in paragraph 43-75(f) is non-cumulative. This means that the activity of making a road referred to in that paragraph is to be read separately from the activity of maintaining a road referred to in the paragraph. Each activity is an eligible activity if the requirements of paragraph 43-75(f) are met.

183. The term 'making and maintaining ... of a road' includes all activities undertaken at the road construction site to make or maintain the road.

184. The Commissioner's view is, the 'making ... of a road' commences with the initial clearing of the road alignment.

185. The Commissioner considers that 'maintaining ... of a road' encompasses a range of road maintenance activities, necessary to maintain a road to the operational standard required specified in the relevant Forestry Code of Practice or state Regulatory regime. This includes the upgrading of an existing road.

186. The term 'making and maintaining ... of a road' does not include the process of extraction of gravel and its transportation to the road site for use in the construction of the road.^[95]

187. The term 'making and maintaining ... of a road' does not include the maintenance of road signs, road safety barriers and the like when they are carried as independent activities. However, if road signs and safety barriers are constructed in a way that is integral and incidental to the making or maintaining of a road, then the construction or maintenance of road signs, road safety barriers and the like are part of that road making or road maintenance activity.

Integral

188. The word 'integral' means:

1 . having to do with a whole; belonging as part of the whole, constituent or component: the integral parts of the human body.

2 . necessary to the completeness of the whole'.^[96]

189. A road will be integral to the activities referred to in paragraphs 43-75(a), 43-75(b) or 43-75(c), if the road is necessary to and forms a fundamental part of those activities.

190. The making and maintaining of a road, is a qualifying activity under paragraph 43-75(f) only if the activity is carried out in a forest or plantation where the planting or tending of trees intended for felling is to be carried out, or in a forest or plantation where the thinning or felling of standing timber is to be carried out.

191. The making and maintaining of a road outside the relevant forest or plantation is not a qualifying activity under paragraph 43-75(f).

192. If the 'making' and 'maintaining' activities are carried out both within the relevant forest or plantation and outside that forest or plantation, an apportionment is necessary to determine the extent to which taxable fuel is acquired for use in a qualifying activity.

193. An example of a road in a forest or plantation that is accepted as being 'integral' to the relevant activities is a forestry road as described in paragraph 61 of this Ruling. The making of a forestry road and its maintenance are qualifying forestry activities under paragraph 43-75(f).

194. The Commissioner considers that roads made or maintained primarily or principally for recreational or tourism purposes are not integral to the relevant forestry activities, even though these roads may be used in the transportation of timber in a forest or plantation or from a forest or plantation to a sawmill or chipmill not situated in the forest or plantation.

195. If a road in a forest or plantation is made and maintained for more than one purpose, the dominant purpose must be integral to forestry for the construction and maintenance of that road to be a qualifying use. If the dominant purpose for the construction and maintenance is for forestry purposes, the road is regarded as integral to the forestry activities mentioned in paragraphs 43-75(a), 43-75(b) and 43-75(c). In these circumstances, you are entitled to a fuel tax credit with a nil carbon reduction amount in respect of all the taxable fuel acquired for use in the making and maintaining of the road.

196. If, however, the dominant purpose of the road is not for forestry activities but for some other activity (for example for tourism purposes), no entitlement to a nil carbon reduction amount arises in respect of any taxable fuel acquired for use in the making and maintaining of the road.

Taxable fuel acquired for use in propelling a vehicle on a public road

197. You are entitled to a fuel tax credit under section 41-5 for taxable fuel acquired for use in a vehicle^[97] with a GVM greater than 4.5 tonnes, travelling on a public road.^[98]

Meaning of 'public road'

198. The activities in forestry, as defined in section 43-75, include transporting timber in a forest or plantation where the timber was felled, or from the forest or plantation to a sawmill or chipmill situated outside the forest or plantation.

199. The operation of the FT Act means that the transportation of timber by vehicles on roads that are not public roads qualifies as an eligible use under paragraphs 43-75(c) and 43-75(d). Therefore, it is important to define 'public road'.

Roads that are public roads

200. A 'road' is defined in common law as a way from one place to another, which enables passage between the two. It is well established that, under common law, a 'road' becomes a 'public road' when the owner of the land has unequivocally indicated an intention to dedicate the road for public use, and the public has accepted the proffered dedication.^[99]

201. However, in Australia the vast majority of public roads are constructed by government. In Brodie and Anor v. Singleton Shire Council,^[100] Kirby J observed:

... from the start, the building of public highways and roads in Australia was a responsibility of government, and eventually of statutory bodies (and not parishes and men thereof as in England...).^[101]

202. There are statutory authorities in each state and territory, which are responsible for the construction, management and maintenance of the public road transport infrastructure within their own jurisdictions. Roads which are constructed, managed or maintained by these authorities are public roads. These roads fall into three main categories, being:

(i)

national highways;

(ii)

state and territory highways and main roads; and

(iii)

local roads and streets.

National highways

203. The roads making up the national highways network are constructed and maintained by the states and territories out of funding provided by the Federal Government. These major highways are easily identifiable. They are public roads for the purposes of subsection 43-75.

State and territory highways and main roads

204. Each state and territory has a statutory authority^[102] which is responsible for the construction of highways and main roads within the state or territory. State and territory highways and main roads are the major connecting roads between towns.

205. It is usually the case that the governing statute provides for the formal declaration, proclamation or dedication of the highways and main roads for which the particular state or territory statutory authority is responsible.^[103]

206. The Commissioner considers that, in each state and territory, the roads which are constructed and maintained by the state or territory authority which has the primary responsibility for highways and main roads, are public roads for the purposes of section 43-75.

Local roads

207. Within each state and the Northern Territory there are numerous local government authorities with statutory responsibility for the construction and maintenance of local roads within their own areas.

208. Local roads are the smaller connecting roads and suburban streets within the boundaries of a local government area.

209. The powers of local government authorities in each state and the Northern Territory are enumerated in the statutes which create local governments in that state or territory. The legislative powers and responsibilities in each statute apply to each individual local government area within the same state or territory. However, the statutes are not identical and this gives rise to variations according to the state or territory in which a particular local government area is located.

210. Although local government statutes do not always provide for dedication or declaration of roads as public roads, such statutes normally vest the ownership of local roads in a local government authority.^[104] In Australia, the vesting by statute in local government authorities of fee simple in land over which there are public streets leaves the streets dedicated to the public.^[105] As noted by Murray CJ in Attorney-General; Ex rel Australian Mutual Provident Society v. Corporation of the City of Adelaide:^[106]

...although the fee simple of all public streets within a municipality is vested in the Corporation of that Municipality, I think it is clear that the Corporation has not an unencumbered estate in the land, and an unrestricted right to use it in any manner it pleases. The surface is a street dedicated to the public, and it is as a street that the Corporation acquires its title to the land... It holds, therefore, subject to the rights of the public to use the street for passing and re-passing, except in so far as those rights may be taken away or limited by statute.^[107]

211. The Commissioner considers that, in each local government area, those roads and streets, which are vested in, constructed or maintained by a local government authority for general public usage are public roads for the purposes of section 43-75. Public roads under the common law

212. If a road is not under the control and management of a state or territory authority which is responsible for the provision of road infrastructure to the public, then whether the road is a 'public road' under the common law is a question of fact.

213. For a road to be dedicated as a public road at common law, there must be established an 'unequivocal indication of the intention of the owner of the land to dedicate it to the public as a road'.^[108]

214. Factors to be considered in determining whether an owner of land has dedicated it as a public road under the common law include:

•

whether there has been a declaration of an intention to dedicate;

•

delineation on maps or plans of roads set apart for public use;

•

use by the public (indicating acceptance of the dedication);

•

whether vehicles must be registered to use the road and state or territory traffic laws are applicable while the vehicles use the road; and

•

the expenditure of money by public bodies in forming or maintaining the land as a road.

215. When considered with all the relevant evidence, the above factors may amount to an unequivocal indication of the intention of the owner of the land to dedicate it to the public as a road. If that dedication is accepted by the members of the public as such, the road is a public road.

216. However, the courts have indicated that caution is necessary in determining whether a dedication of a road has been made. In President of the Shire of Narracan v. Leviston,^[109] Barton J said:

by placing too liberal a construction in favour of the public and against the landowner upon acts of passage which are tolerated by him, there is a danger lest, in the sparsely settled districts of a country like this, where roads are few and unmade, and mutual concessions on the part of the land owners and the public are necessary, land owners should be put upon the defensive, and be forced to set obstructions in the way of every act which, in a long course of time, might be construed as the assertion of a right of public highway.^[110]

217. The comments of Barton J were referred to with approval by Lockhart J in Attorney-General for the Northern Territory of Australia v. Minister for Aboriginal Affairs and Others.^[111]

Roads that are not public roads

Roads managed by statutory authorities not having responsibility for highways, main roads and local roads

218. If a road is constructed or maintained by a statutory authority, other than an authority having responsibilities for highways, main roads or local roads, principally and primarily for the purposes of carrying out the statutory objects of the authority, and any public use of the road is subordinate to those statutory objects, then the road is not a public road.

219. Where such a statutory scheme confers a limited right of public access, which is subordinate to the main objects of the statute, then members of the public have a lesser entitlement to that access than the entitlement they have to use public highways, main roads, local roads and suburban streets. The Commissioner considers that if the public does not have a plenary (unqualified) right of access and use, a road cannot be characterised as a public road.

220. Similar principles apply if a statute confers upon an authority the responsibility for control and management of land on which a forest or plantation exists and the authority is not an authority with responsibility for the public infrastructure in the State or Territory. The authority may make and maintain roads to have access within the forest or plantation for their forestry management purposes. Whilst members of the public may use these roads, their use is subordinate to the use of the authority, which may deny, without any notice, access to the road by members of the public. These roads are not public roads.

Forestry roads

221. 'Forestry roads' are roads within forests or plantations, which are constructed primarily and principally for the purposes of providing access to an area to enable trees to be planted or tended in the area, or timber felled in the area to be removed.^[112] Forestry roads may be constructed or managed by a forestry authority^[113] in the course of carrying out its statutory function^[114] for the purposes of forest management and the production and harvesting of timber, or they may be constructed by entities engaged in forestry activities. A road that is constructed and which falls within paragraph 43-75(f) is a forestry road.

222. The Commissioner considers that a forestry road as described in paragraph 61 of this Ruling is not a public road for the purposes of section 43-75.

223. In some states and territories, forestry roads are required to be constructed in accordance with a Code of Practice.^[115] In all states and territories, forestry roads are required to be constructed in accordance with environmental, conservation and heritage laws.

224. A number of state and territory forestry statutes require forestry authorities to encourage public use of forests for recreation.^[116]

225. The Commissioner takes the view that forestry roads are not public roads even if public access is encouraged. A forestry road does not become a public road merely because members of the public use the road to access a forest area for recreation purposes (for example, for picnics or for bushwalking) or for the purposes of removing firewood from designated areas for personal use. The use of forestry roads for such purposes is subordinate to the primary objects of forestry management and the production and harvesting of timber. Members of the public do not have a sufficiently unfettered right of access to, or use of, the roads to characterise them as public roads.

226. An example of the above is to be found in New South Wales. The Forestry Act 1916 (Forestry Act) of that State creates a Forestry Commission. One of its objects is to conserve and utilise the timber on Crown-timber lands and land owned by the Commission otherwise under its control and management.^[117] The Act authorises the Commission to construct roads necessary for the taking or removing of timber from Crown lands or from state forests.^[118]

227. Under the terms of the Forestry Act, the Forestry Commission is not an authority having statutory responsibility for road transport infrastructure. Roads are constructed by the Commission for its own purposes and are not dedicated to public use. While members of the public make use of the forestry roads under the management and control of the Forestry Commission, they may do so only if this does not interfere with the primary and principal purpose of the roads, being for forestry management purposes, including the removal of timber from the forest.

228. In relation to the above example, the Commissioner takes the view that the limitations on public use of forestry roads constructed, managed and maintained by the Forestry Commission in New South Wales indicates that those forestry roads are not public roads. Our conclusion would be the same in relation to identical regimes in other States or in the Australian Capital Territory or the Northern Territory.

Conversion of a forestry road to a public road

229. On occasions, responsibility for a forestry road is formally passed from the forestry authority to a local government authority or to a state or territory authority having responsibility for highways and main roads. In such cases, the affected road will, thereafter, be a public road even if, after the transfer, it is formally declared by the state or territory main road authority or local government authority to be a 'forest road'. The transfer of control and management of the road to the authority having responsibility for highways and main roads results in the road being declared or dedicated as a public road.

230. For example, the Victorian Roads Corporation established under the Transport Act 1983 (Vic), has as one of its objects the maintenance and upgrading of the State's road networks^[119] and, in the exercise of its powers, can declare a road to be a 'forest road'.^[120] In this case, the 'forest road' is a public road because it is constructed and maintained by the Victorian authority having responsibility for highways and main roads.

Roads over privately owned land

231. An owner of private property may permit members of the public to pass over the property. An entity may lawfully enter private land if the entity has an express or implied invitation, licence, permission, lawful authority or consent of the entity in possession of the land.^[121] An entity who initially enters land with lawful authority becomes a trespasser if the consent of the owner is revoked.^[122]

232. The use of a road over private land by members of the public does not create a public road, notwithstanding that the owner of the land does not hinder the use of the road by the public. Private land cannot become a public road without an effective act of dedication by the owner.^[123]

Appendix 2 - Detailed contents list

233. The following is a detailed contents list for this Ruling:

FTR 2012/D2

References

ATO references:
NO 1-3YYB08Z

Related Rulings/Determinations:

TR 2006/10
TD 2003/12
MT 2006/1
FTR 2006/3
FTR 2008/1
FTD 2006/3
FTD 2009/1
FTD 2010/1

Subject References:
acquire
apportionment
contractors
diesel fuel
eligible
energy grant
Energy grants (credits) scheme
enterprise
in the course of
FTC thinning or felling
forest
forestry
grants
mill
milling
plantation
planting or tending of trees
public road
sawmills
timber
transporting
vehicle

Legislative References:
FTA 2006 43-8(4)
FTA 2006 43-8(4)(b)
FTA 2006 43-15
FTA 2006 43-70
FTA 2006 43-75
FTA 2006 43-75(a)
FTA 2006 43-75(b)
FTA 2006 43-75(c)
FTA 2006 43-75(d)
FTA 2006 43-75(e)
FTA 2006 43-75(f)
FTA 2006 Subdiv 45A
FTA 2006 Div 44
FTA 2006 Div 60
FTA 2006 60-5(1)
FTA 2006 61-15
FTA 2006 61-20
FTA 2006 Div 65
FTA 2006 65-5(1)
FTA 2006 65-5(2)
FTA 2006 65-5(3)
FTA 2006 65-5(4)
FTA 2006 110-5
Fuel Tax (Consequential and Transitional Provisions) Act 2006
Fuel Tax (Consequential and Transitional Provisions) Act 2006 Sch 3
AIA 1901 21(1)
AIA 1901 21(1)(b)
Acts Interpretation Amendment Act 2011
Acts Interpretation Amendment Act 2011 2
ANTS(GST)A 1999
ANTS(GST)A 1999 9-20
ANTS(GST)A 1999 Div 23
ANTS(GST)A 1999 184-1
ANTS(GST)A 1999 195-1
Customs Act 1901
Customs Act 1901 164
Customs Act 1901 164(7)
Customs Act 1901 164(7)(d)
Customs Tariff Act 1995
Customs Tariff Act 1995 9
Diesel Fuel Taxes Legislation Amendment Act 1982
EGCSA 2003
Excise Act 1901
Excise Act 1901 78A
Excise Tariff Act 1921
ITAA 1936 82KZMG
ITAA 1997 43-72(1)
Forest Products Act 2000 (WA)
Forestry Act 1916 (NSW)
Forestry Act 1916 (NSW) 8A(1)(a)
Forestry Act 1916 (NSW) 11(1)(e)
Forestry Act 1920 (Tas)
Forests Act 1958 (Vic)
Forests Act 1958 (Vic) 20
Forestry Practices Code (Tas) Ch B
Local Government Act 1999 (SA) 208(1)
Main Roads Act 1930 (WA) 13
Real Property Act 1886 (SA)
Roads Act 1993 (NSW)
Roads Act 1993 (NSW) 7
Roads Act 1993 (NSW) 12
Roads Act 1993 (NSW) 13
Roads and Jetties Act 1935 (Tas) 7
Transport Act 1983 (Vic)
Transport Act 1983 (Vic) 16
Transport Act 1983 (Vic) Sch 2
Transport Act 1983 (Vic) Sch 5 1
Transport Infrastructure Act 1994 (Qld) 23
TAA 1953

Case References:
Cooper Brooks (Wollongong) Pty Ltd v. FCT
(1981) 147 CLR 297

Cowell v. Rosehill Racecourse Co Ltd
(1937) 56 CLR 605
[1937] ALR 273
(1937) 11 ALJR 32
[1937] HCA 17
Federal Commissioner of Taxation v. Payne
[2001] HCA 3
46 ATR 228
2001 ATC 4027
(2001) 202 CLR 93
(2001) 177 ALR 270
(2001) 75 ALJR 442
Kiosses v. Corporation of the City of Henley and Grange
(1971) 6 SASR 186
(1971) 33 LGRA 286
Lincoln Hunt Australia Pty Ltd v. Willesee
(1986) 4 NSWLR 457
Permanent Trustee Company of New South Wales Ltd v. Campbelltown Municipal Council
(1960) 105 CLR 401
[1961] ALR 164
(1960) 6 LGRA
President of the Shire of Narracan v. Leviston
(1906) 3 CLR 846
(1906) 12 ALR 294
Re Brymay Forests Pty Ltd and Collector of Customs Victoria
(1985) 9 ALN N177
Re City of Nunawading and Comptroller-General of Customs No. V93/540 AAT No. 9758
(1994) 36 ALD 628
Re MSD Constructions Pty Ltd and CEO of Customs (Unreported, Administrative Appeals Tribunal, Webster SM, Davis M, Cunningham M, 11 September 1996) T95/130, Hobart

Re TJ Depiazzi and Sons v. Collector of Customs NSW No. W92/114 AAT No. 8770, 11 June 1993
(1993) 17 AAR 557
Re Wandoo Alliance Pty Ltd and Chief Executive Officer of Customs
[2001] AATA 801
(2001) 34 AAR 98
State Rail Authority of NSW v. Collector of Customs
(1991) 33 FCR 211
14 AAR 307
Vickery v. Municipality of Strathfield
(1911) 11 SR (NSW) 354
(1911) 28 WN (NSW) 107
Wesfi Pty Ltd v. Collector of Customs WA No. W84/46, 20 December 1984 (1984) 7 ALN N8

Other References:
Diesel Fuel Taxes Legislation Amendment Bill 1982
Explanatory Memorandum to the Diesel Fuel Taxes Legislation Amendment Bill 1982
Explanatory Memorandum to the Energy Grants (Credits) Scheme Bill 2003
PSLA 2010/3
Revised Explanatory Memorandum to the Fuel Tax Bill 2006 and Fuel Tax (Consequential and Transitional Provisions) Bill 2006
The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW