ATO Interpretative Decision
ATO ID 2004/785 (Withdrawn)
Excise
Energy Grants (Credits) Scheme: off-road - agriculture - purchase of an existing agricultural property to be used for an agricultural activity by a new entityFOI status: may be released
-
This ATO ID is withdrawn as it has been superseded by Product Grants and Benefits Ruling PGBR 2005/3This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 2 September 2005
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is an entity who undertakes earthworks on a farm, after purchasing it, with the intention of continuing to operate it as a farm, carrying out an 'agricultural construction activity' as defined in section 25 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?
Decision
Yes. An entity who undertakes earthworks on a farm, after purchasing it, with the intention of continuing to operate it as a farm, is carrying out an 'agricultural construction activity' as defined in section 25 of the EGCSA.
Facts
An entity purchases a farm on which the cultivation of crops was carried on by the previous owner.
No crop was growing on the farm at the time of the purchase by the entity. However, the entity intends to sow a crop (the same as was grown prior to the purchase) as soon as the land is prepared.
The land has not remained fallow for any period of time. The entity is merely purchasing the farm to continue a business of cultivating crops for sale.
The entity has contracted an earthmoving contractor to carry out earthworks necessary to prepare the property for its continuing use as a farm.
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 'primary production'.
The term 'primary production' is defined in section 21 of the EGCSA to mean a number of activities, including agriculture'. 'Agriculture' is defined in section 22 of the EGCSA to include an 'agricultural construction activity'.
In this situation, the most pertinent activity in paragraph 25(e) which states that the expression 'agricultural construction activity' means:
the 'carrying out of earthworks' for use in a core agricultural activity if the earthworks:
The activities will be an agricultural construction activity if the earthworks are:
- •
- for use in a core agricultural activity
- •
- carried out on the agricultural property where that core agricultural activity is carried on, and
- •
- carried out by the person who carries on the core agricultural activity or by a person contracted by that person.
Each test will be considered in turn.
1. Are the earthworks for use in a 'core agricultural activity'?
'Core agricultural activity' is defined in section 31 of the EGCSA, and means any of the following activities:
- (a)
- the cultivation of the soil
- (b)
- the cultivation or gathering in of crops
- (c)
- the rearing of live-stock, or
- (d)
- viticulture, horticulture, pasturage or apiculture
provided that they are undertaken for the purpose of or for purposes that will directly benefit a business undertaken to obtain produce for sale.
In this case the earthworks are to be used in a core agricultural activity, namely crop growing, which will be undertaken for the purpose of a business undertaken to obtain produce for sale. The fact that the property has changed hands is irrelevant. Therefore, the first test is met.
2. Are the earthworks being carried out on the agricultural property where that core agricultural activity is carried on?
The EGCSA specifically requires that the earthworks be carried out on the agricultural property where the core agricultural activity that the earthworks will be used in, is carried on.
However, what must firstly be determined is whether this area of land is an 'agricultural property'.
The term 'agricultural property' is not defined in the EGCSA. The issue of what constitutes an agricultural property for the purposes of the Diesel Fuel Rebate Scheme (DFRS) was considered by the Administrative Appeals Tribunal (AAT) in Raymond Cedric and Brian Richard Wallace v. CEO of Customs [1998] AATA 633 (25 June 1998); (1998) 27 AAR 430 (Wallace). As the Energy Grants (Credits) Scheme maintains similar entitlements to its successor (the DFRS), the decision in Wallace remains relevant.
Wallace is authority for the view that an agricultural property is a property on which the activities of cultivation of the soil, the growing and gathering in of crops or the rearing of livestock or a mixture of more than one of these activities are carried out for the purpose of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale.
The change in ownership of the property does not alter the fact that the property where the earthworks are being carried out is an 'agricultural property'. The property is a property on which agricultural activities have been carried on and will continue to be carried on for the purpose of a business undertaken to obtain produce for sale. The land has not remained fallow for any period of time. The entity is merely purchasing the property to continue operating it as it was previously, with the same core agricultural activity being carried on.
Therefore, the second test has been satisfied.
3. Are the earthworks carried out by a person who carries on the core agricultural activity or a person contracted by that person?
As the earthworks are being carried out by a person contracted to the farmer who is carrying on the core agricultural activity, this test is also met.
Accordingly, an entity who undertakes earthworks on a farm after purchasing it with the intention of continuing to operate it as a farm, is carrying out an 'agricultural construction activity' as defined in section 25 of the EGCSA.
Date of decision: 23 July 2004
Legislative References:
Energy Grants (Credits) Scheme Act 2003
section 21
section 22
section 25
paragraph 25(e)
section 31
section 53
Case References:
Raymond Cedric and Brian Richard Wallace v. CEO of Customs (25 June 1998)
[1998] AATA 633
(1998) 27 AAR 430
ATO ID 2003/1162
ATO ID 2004/64
ATO ID 2004/740
ATO ID 2004/741
ATO ID 2004/742
ATO ID 2004/743
ATO ID 2004/744
Keywords
EGCS agriculture
EGCS agricultural earthworks
EGCS agricultural construction activity
ISSN: 1445-2782
| Date: | Version: | |
| 23 July 2004 | Original statement | |
| You are here → | 2 September 2005 | Archived |