ATO Interpretative Decision

ATO ID 2004/743

Excise

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is land levelling undertaken to rehabilitate a rubble pit located on an agricultural property, 'earthworks' as defined in paragraph 25(e) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes. Land levelling undertaken to rehabilitate a rubble pit located on an agricultural property is 'earthworks' as defined in paragraph 25(e) of the EGCSA.

Facts

An entity (the farmer) carries on a core agricultural activity on an agricultural property.

The farmer carries out rehabilitation work on a rubble pit located on the agricultural property.

The rehabilitation involves land levelling. The land levelling activities include the levelling of the site of the actual rubble pit and the levelling of overburden. The rehabilitation is necessary so that the land can be reused for agricultural purposes.

Reasons for Decision

Section 53 of the EGCSA provides that, subject to the conditions and restrictions specified in the Energy Grants (Credits) Scheme Regulations 2003, an entity is entitled to an off-road credit if they purchase or import into Australia off-road diesel fuel for a use by them that qualifies, including 'agriculture'.

'Agriculture' is defined in section 22 of the EGCSA to include an 'agricultural construction activity', which is defined in turn in section 25 of the EGCSA.

The most pertinent activity in section 25 of the EGCSA is set out in paragraph 25(e), which states that the expression 'agricultural construction activity' includes:

the carrying out of earthworks for use in a core agricultural activity if the earthworks:

(i)

are carried out on an agricultural property where the core agricultural activity is carried on; and

(ii)

are carried out by the person who carries on the core agricultural activity or by a person contracted by that person to carry out the earthworks.

Based on the above definition, land levelling activities undertaken to rehabilitate a rubble pit on an agricultural property will constitute 'earthworks' if the following requirements are satisfied:

1.

the land levelling falls within the definition of 'earthworks'

2.

the earthworks are 'for use in a core agricultural activity'

3.

the earthworks take place on an agricultural property where a core agricultural activity is carried on, and

4.

the earthworks are carried out by the person who carries on the core agricultural activity or by a person contracted to carry out the earthworks.

Each of these requirements will be examined in turn.

1. Is land levelling undertaken to rehabilitate a rubble pit 'earthworks'?

Section 32 of the EGCSA defines 'earthworks' as:

(a)

the forming or maintenance of levee banks or windbreaks; or

(b)

contour banking; or

(c)

land levelling or land grading.

The rehabilitation of the rubble pit involves the levelling of the site of the pit and levelling of overburden. The levelling activities are focused on making the area reusable for agricultural purposes.

The land levelling activities would therefore constitute 'earthworks' within section 32 of the EGCSA as land-levelling is specifically included within the definition of 'earthworks'.

2. Are the earthworks 'for use in a core agricultural activity'?

The land levelling is carried out so that the land can continue to be used for agricultural purposes, and the farmer is undertaking a core agricultural activity. As the earthworks are for use in a core agricultural activity, this requirement is met.

3. Are the earthworks carried out on the agricultural property where a core agricultural activity is carried on?

The farmer is conducting a core agricultural activity. As the earthworks are being carried out on the agricultural property where the core agricultural activity is carried on, this requirement is satisfied.

4. Are the earthworks being carried out by the person who carries on the core agricultural activity or by a person contracted to carry out the work?

The earthworks are being carried out by the farmer who is carrying on a core agricultural activity. Therefore this requirement is satisfied.

Conclusion

The land levelling activities satisfy the definition of earthworks in the EGCSA. The earthworks are carried out for use in a core agricultural activity, on the agricultural property where the core agricultural activity is being carried out, and are carried out by the farmer who is carrying on the core agricultural activity.

Accordingly, the land levelling undertaken to rehabilitate a rubble pit located on an agricultural property is 'earthworks' as defined in paragraph 25(e) of the EGCSA.

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 22
   section 25
   paragraph 25(e)
   section 32
   section 53

Keywords
EGCS agricultural construction activity
EGCS agricultural earthworks
EGCS agriculture
EGCS off-road

Business Line:  Indirect Tax

Date of publication:  10 September 2004

ISSN: 1445-2782