ATO Interpretative Decision
ATO ID 2006/85 (Withdrawn)
Excise
Energy Grants (Credit) Scheme: off-road - forestry - chipping of timber offcutsFOI status: may be released
-
This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.
Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of the period the Act was in force, 1 July 2003 up to and including 30 June 2012.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the chipping of offcuts from timber that has already been milled 'forestry' as defined in paragraph 35(d) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?
Decision
Yes. The chipping of offcuts from timber that has already been milled is 'forestry' as defined in paragraph 35(d) of the EGCSA.
Facts
An entity mills timber at a saw mill, situated in the forest in which the trees are felled, to square off the timber and then saw it to standard sizes.
The off-cuts consist of bark, branches and parts of the trunk.
To maximise its yield from the felled trees the entity transports the offcuts from the squared timber to a chip mill, situated outside of the forest in which the timber is felled. There the offcuts are chipped by a rotary actioned machine down into a size and shape suitable for use in the manufacture of chipboard.
Chipping the offcuts is the milling of timber for the purposes of section 35 of the EGCSA.
The offcuts are timber for the purposes of section 35 of the EGCSA.
Reasons for Decision
Primary production is defined in section 21 of the EGCSA to mean 'forestry'. The term 'forestry' is in turn defined in section 35 of the EGCSA:
The expression forestry means:
and includes:
- ...
- (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
- ...
In Re TJ Depiazzi and Sons and Collector of Customs NSW (1993) 17 AAR 557 (Depiazzi) the Administrative Appeals Tribunal (AAT) at paragraph 31 considered that the term 'chipping' refers to one of the reduction processes in which tree parts and residue are broken down to a state where they become capable of being used in other productive activities.
At paragraph 24 the Tribunal states:
...Further sawing of logs into smaller planks would also come within the description of saw milling. This would be so even if the further reduction in size occurs at a different and possibly specialised saw mill. That a second processing occurs does not necessarily disqualify that process as too remote from the family of forestry-related processes that have been seen by Parliament to merit assistance because of their association with primary production. Once, however, the basic planks are subject to processes or operations that would shape them for use in houses or carpentry, the milling process would come to an end. ...
The offcuts are chipped to reduce them to a size and shape that makes them suitable for use in the manufacture of chipboard. The fact that the timber, of which the offcuts were constituents, has already been milled at another saw mill does not disqualify the chipping of the offcuts from being the milling of timber.
The term 'milling' comprises operations performed at a chip mill, including those necessarily incidental to the process of milling timber such as the handling of timber and waste disposal, up to the point where the timber is stockpiled, ready for secondary processing.
Therefore chipping the offcuts at a chip mill situated outside of the forest in which the timber was felled is 'forestry' as defined in paragraph 35(d) of the EGCSA.
Date of decision: 20 March 2006
Legislative References:
Energy Grants (Credits) Scheme Act 2003
section 21
section 35
paragraph 35(d)
Case References:
TJ Depiazzi and Sons and Collector of Customs NSW
(1993) 17 AAR 557
Related Public Rulings (including Determinations)
Product Grants and Benefits Ruling PGBR 2005/1
ATO ID 2006/86
Keywords
EGCS forestry
EGCS milling
ISSN: 1445-2782
| Date: | Version: | |
| 20 March 2006 | Original statement | |
| You are here | 1 July 2012 | Archived |