ATO Interpretative Decision

ATO ID 2006/15

Excise

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

Issue

Is subjecting generic milled timber to a preservation treatment, prior to despatch, part of the process of milling timber at a saw mill and therefore 'forestry' as defined in section 35 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes. Subjecting generic milled timber to a preservation treatment, prior to despatch, is part of the process of milling timber at a saw mill and therefore is 'forestry' as defined in section 35 of the EGCSA.

Facts

An entity operates a saw mill situated outside of a forest from which it is supplied with felled timber.

On arrival at the saw mill, the entity unloads and stockpiles the logs. From the stockpile, the logs are taken to be de-barked using rotary action de-barking machines.

Once de-barked, the logs are air dried before being placed in kilns to complete the drying process. Once dried, the entity saws the logs into standard lengths and sizes (generic timber).

The generic timber is then subjected to a preservation treatment. Once the preservation treatment is complete, the generic timber is deposited in the loading bay ready to be loaded and delivered to the customer.

Reasons for Decision

The term 'forestry' is relevantly defined in section 35 of the EGCSA as including

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 ...

In Re Brymay Forests Pty Ltd v. Collector of Customs Victoria (1985) 9 ALN N177 (Brymay) it was determined, in part, that the use of a diesel powered front-end grab tractor to take logs from the log stack to the production line where they are milled was also milling of timber. The Tribunal reached this conclusion as:

... the front end grab tractor or tractors are used exclusively in relation to the saw milling operations ... Their use is necessarily incidental to the operations.

In Brymay, the Tribunal also determined that, while the debarking and sawing of logs into billets constituted the milling of timber, the chopping of veneer sheets did not, as that process was a secondary treatment and not a process of primary production.

It is clear from Brymay that 'milling of timber' is not limited to the actual subjection of the timber to the mill, but includes activities necessarily incidental to the process of milling timber. However, it does not extend so far as to include activities more properly regarded as secondary processing.

The Explanatory Memorandum to the EGCSA states that the energy grants credits scheme is to provide equivalent entitlements to those of the diesel fuel rebate scheme administered under the Customs Act 1901 and the Excise Act 1901, accordingly the decision in Brymay is still considered relevant and can be applied to the current situation.

In this instance, the operations which are undertaken at the mill do not include secondary processing. The timber leaves the mill in generic forms suitable for a variety of uses. All the operations undertaken at the mill are considered to be undertaken in primary production for the purposes of the off-road grant. Thus the unloading, stockpiling, de-barking, drying and preserving of the timber are all necessary activities incidental to the process of milling the logs. These activities are therefore part of the milling process.

Accordingly, subjecting generic milled timber to a preservation treatment prior to despatch constitutes the 'milling of timber' and falls within the definition of forestry in paragraph 35(d) of the EGCSA.

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 35
   subsection 35(d)

Case References:
Re Wesfi Pty Ltd and Collector of Customs (WA) No. W84/46
   (1984) 7 ALN N8

Keywords
EGCS forestry
EGCS milling
EGCS processing

Business Line:  Excise

Date of publication:  20 January 2006

ISSN: 1445-2782