ATO Interpretative Decision

ATO ID 2003/1162

Excise

Energy Grants (Credits) Scheme: off road - agricultural - construction activity
FOI status: may be released

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Status of this decision: Decision current

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 construction of a footprint for a farm shed an agricultural construction activity as defined in section 25 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes. The construction of a footprint for a farm shed is an agricultural construction activity as defined in section 25 of the EGCSA.

Facts

The entity operates an earthmoving business.

The entity has been contracted by a farmer to construct a building footprint for a shed which will be used to house live-stock. The footprint is a one metre high pad to be used as a base for the shed.

The farmer carries on the core agricultural activity of the rearing of live-stock for the purposes of a business undertaken to obtain produce for sale.

The livestock are reared on the agricultural property where the shed is to be built.

Reasons for Decision

Under the Energy Grants (Credits) Scheme, an entity is, subject to certain conditions, entitled to an off-road credit in the form of an energy grant if they purchase diesel fuel for use in certain activities. One eligible activity is primary production, which includes agriculture.

'Agriculture' is defined in section 22 of the EGCSA. Included within the definition of agriculture is an agricultural construction activity.

The term 'agricultural construction activity' is defined in section 25 of the EGCSA, and paragraph 25(c) states that it means:

the construction or maintenance of sheds, pens, silos or silage pits, for use in an agricultural activity if the construction or maintenance:

(i)
is carried out on an agricultural property where a core agricultural activity is carried on; and

(ii)
is carried out by the person who carries on the first-mentioned agricultural activity or by the person contracted by that person to carry out the construction or maintenance.

Based on the above definition, the erection of the footprint will constitute an agricultural construction activity if the following requirements are satisfied:

1.: The building of the footprint is part of the construction activity
2.: The shed is for use in an agricultural activity
3.: The construction takes place on an agricultural property where a core agricultural activity is carried on, and
4.: The construction is carried out by the person who carries on the agricultural activity for which the shed will be used or a person contracted to carry out the work.

Each of these requirements will be examined in turn:

1. Is the building of a footprint for a shed part of the construction activity?

The term 'construction' is not defined in the EGCS, and therefore takes on its ordinary meaning.

The Macquarie Dictionary (Revised Third Edition, 2001) defines 'construct' as meaning:

1.: to form by putting together parts; build; frame; devise

and 'construction' as

1.: the act or art of constructing.
2.: the way in which a thing is constructed.

The preparation of a site prior to construction is not considered to form part of the construction activity as it occurs too early. However, in this instance, the construction of the footprint relates to the specific shed being built. This can be contrasted with broader preparatory activities such as land levelling, or site clearing.

Therefore, the establishment of the shed's footprint constitutes the initial point in the construction of the shed.

2. Is the shed for use in an agricultural activity?

'agricultural activity' is defined in section 28 of the EGCSA as

an activity referred to in any one of the paragraphs of the definition of agriculture in subsection 22(1) .... If that activity is carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale

The activities listed in subsection 22(1) of the EGCSA include the rearing of live-stock. The farmer's live-stock activities are in the form of a business. Therefore, the shed will be used in the agricultural activity of rearing livestock.

3. Does the construction takes place on an agricultural property where a core agricultural activity is carried on?

It is accepted that this test is met.

4. Is the construction carried out by the person who carries on the agricultural activity the shed is to be used in or a person contracted to carry out the work?

The construction of the footprint is being carried out by a person contracted by the farmer, who carries on the agricultural activity (the rearing of livestock) the shed is to be used in. Therefore this requirement is satisfied.

Conclusion

The erection of a footprint for the shed is part of the construction of a shed on an agricultural property where a core agricultural activity is carried on, and is being carried out by a person contracted by the farmer to undertake the work.

Accordingly, the construction of a footprint for a shed is an 'agricultural construction activity' as defined in section 25 of the EGCSA.

Date of decision: 6 December 2003

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 22(1)
   paragraph 22(1)(c)
   section 25
   paragraph 25(c)
   section 28

Other References:
The Macquarie Dictionary, Revised Third Edition 2001, The Macquarie Library Pty Ltd, Australia.

Keywords
EGCS agricultural construction
EGCS agriculture
EGCS core agricultural activity
EGCS off-road
Energy grants (credits) scheme

Business Line: Indirect Tax

Date of publication: 24 December 2003

ISSN: 1445-2782

history

	Date:	Version:
You are here →	6 December 2003	Original statement
	1 July 2012	Archived

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