ATO Interpretative Decision
ATO ID 2005/94 (Withdrawn)
ExciseEnergy Grants (Credits) Scheme - Off-road credit - Baling of hay
FOI status: may be released
This ATO ID has been amended to include legal reference to Section 21 of the Energy Grants (Credits) Scheme Act and to update references to PGBR 2005/3.
This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.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 has changed over time. View its history.
Status of this decision: Decision Withdrawn 1 July 2012
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Is the baling of hay, on a site owned and operated by an entity engaged in farming operations, a sundry agricultural activity for the purposes of paragraph 27(b) of the Energy Grants (Credits) Scheme Act 2003 (EGCS Act) if the hay was grown on other sites owned and operated by the same entity?
Yes. The baling of hay, on a site owned and operated by an entity engaged in farming operations, is a sundry agricultural activity for the purposes of paragraph 27(b) of the EGCS Act if the hay was grown on other sites owned and operated by the same entity.
An entity conducts farming activities, producing hay on several sites.
The entity operates a facility for baling and packing hay on one of the sites.
At the baling and packing facility the entity receives bulk deliveries of hay produced on the sites which the entity operates.
At the baling/packing facility, baling/packing machines bale and pack the hay in one operation and are basically industrial versions of a conventional hay baling machine. The machines compact the hay tighter, remove further air and square up the hay into a more compact form and then strap the hay to enable the hay to be stored for any amount of time. The process also enables packing of the bales into containers for transport/export overseas.
Reasons for Decision
Subsection 56(1) of the EGCS Act states that if you are entitled to an off-road credit, you are entitled to an energy grant.
Subsection 53(1) of the EGCS Act provides that you are entitled to an off-road credit if you purchase or import into Australia off-road diesel fuel for a use by you that qualifies. Use in primary production is a use that qualifies under subsection 53(2) of the EGCS Act. The definition of 'primary production' in section 21 of the EGCS Act includes agriculture.
'Agriculture' is defined in subsection 22(1) of the EGCS Act which states in part:
- ...the cultivation or gathering in of crops; or
- ...viticulture, horticulture, pasturage or apiculture
- ...a sundry agricultural activity.
Agriculture includes 'cultivation or gathering in of crops' and 'pasturage'. These activities have occurred prior to the hay being received at the hay baling, packing and storage facility, and therefore the most relevant activities to consider in your situation are sundry agricultural activities.
Sundry agricultural activity
A 'sundry agricultural activity' is relevantly defined in section 27 of the EGCS Act.
An activity that we must consider and is a sundry agricultural activity under the EGCS Act is:
- hay baling on the agricultural property where the hay was cultivated; ...
The Commissioner's view of hay baling as a sundry agricultural activity is discussed in paragraphs 378 and 379 of the Product Grant and Benefit Ruling PGBR 2005/3, which state
378. Hay baling involves the packing of hay into bales or bundles in paddocks for storage or transportation and any subsequent pressing and re-baling of that hay.
379. For a hay baling activity to be a sundry agricultural activity, the activity must be carried out on the same agricultural property on which the hay was grown. It is not necessary that the hay is baled by the farmer. Provided the hay is baled on the agricultural property where it was grown, it does not matter who actually performs the baling.
In this instance, the hay arrives at the baling/packing facilities loosely baled by conventional balers and then re-baled into more compact bales for storage, transport, economy and stability. Although the hay arrives baled, an act of compacting it to smaller bales is considered 'hay baling'.
Therefore the requirements of paragraph 27(b) of the EGCS Act will be satisfied if the hay baling is carried out on the agricultural property on which the hay was cultivated.
The term 'agricultural property' is not defined in the EGCS Act and therefore takes on its ordinary meaning.
In the context of the off-road credits scheme, we consider 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 live-stock or a mixture of more than one of these activities are carried out, provided those activities are carried out for the purpose of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale.
The energy grants credits scheme (EGCS) was introduced on 1 July 2003 to replace the entitlement provisions of the diesel fuel rebate scheme (the previous off-road scheme) administered under the Customs Act 1901 and the Excise Act 1901 and the diesel and alternative fuels grants scheme (the previous on-road scheme). The previous off-road scheme and the previous on-road scheme ceased on 1 July 2003.
Similar to the previous off-road scheme, the energy grants credits scheme is a beneficial scheme that confers benefits on persons that undertake certain activities. We take the view that, as for the previous off-road scheme, the entitlement provisions of the EGCS are intended to be read in a practical, commonsense manner.
In Australian National Railways Commission v. Collector of Customs, SA, (1985) 8 FCR 264; (1985) 69 ALR 367 (ANR), Davies J stated:
Although the diesel fuel rebate provisions use simple language, they are intended to be applied in a practical, commonsense manner to commercial operations.
We consider that the views expressed by Davies J in ANR are equally applicable to the provisions of the EGCS.
Where there is doubt as to the meaning and application of the qualifying provisions, we take the view that they are to be liberally construed unless the text or context requires a narrow construction.
The hay is produced on separate sites owned and operated by the same entity and brought to the one site where the baling equipment is located. To be considered a 'sundry agricultural activity' the separate sites would need to be considered the same agricultural property.
We consider this to be a similar situation to a farm that has different paddocks. The paddocks do not need to be next to each other to be considered part of the same property. Because the different sites are owned and operated by the same entity we consider the different sites are part of the same agricultural property.Date of decision: 30 May 2005
Related Public Rulings (including Determinations)
Product Grant and Benefit Ruling PGBR 2005/3
ATO ID 2004/95
EGCS hay baling
EGCS primary production
EGCS sundry agricultural activity
Energy grants (credits) scheme