ATO Interpretative Decision

ATO ID 2003/712

Excise

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

Issue

Is the processing of trees that are regarded as weeds, into woodchips in the forest where the trees are felled 'forestry' as defined in subsection 164(7) of the Customs Act 1901 for the purposes of the diesel fuel rebate scheme?

Decision

Yes, the processing of trees that are regarded as weeds into woodchips in the forest where the trees are felled is 'forestry' as defined in subsection 164(7) of the Customs Act.

Facts

Various government departments and agencies are attempting to commercialise the removal of large trees that are regarded as pests.

The trees have formed a large natural forest.

The trees are being harvested in a trial designed to test their potential commercial value. In the first phase of the trial, a forestry organisation has been managing the harvesting, chipping and transport of the trees from a number of properties. During the trial, suitable logs will be processed into sawn timber or veneer in local timber mills.

Chips will be used for generating electricity.

The client is contracted by the forestry organisation to undertake mobile chipping of logs and tree heads (fuel logs). The client does not fell the trees. Under the contract, a portion of the forests is made available to the client for infield (mobile) chipping operations. The client has access to fuel logs stockpiled after harvesting operations. The client is only allowed to chip fuel logs within such parts of the harvest area notified by the forestry organisation.

The client uses a rotary action chipping machine to chip the trees and feed the resulting woodchips directly into containers for transport.

Reasons for Decision

Paragraph 78A(1)(aa) of the Excise Act 1901 and corresponding paragraph 164(1)(aa) of the Customs Act provide that a rebate is payable for diesel or like fuel that is purchased for use by that person in 'primary production' (otherwise than for the purpose of propelling a road vehicle on a public road). 'Primary production' includes 'forestry'.

Subsection 164(7) of the Customs Act defines 'forestry' as:

(a)

the planting or tending, in a forest or plantation, of trees intended for felling; or

(b)

the thinning or felling, in a forest or plantation, of standing timber.

and includes

(c)

the transporting, milling or processing, in a forest or plantation, of timber felled in the forest or plantation;...

To fall within paragraph (c) of the definition of forestry:

1. the timber being must have been felled in a 'forest or plantation'; and

2. the transporting, milling or processing of that timber must occur in the 'forest or plantation' where it was felled.

Given:

(a)

the size of the area of land covered

(b)

the density of trees within that area

(c)

the size of the trees

(d)

that the timber is harvested as part of a trial to determine the commercial value of the timber; and

(e)

State Forests refer to the land in that area as a forest

it is accepted that this area of land is a forest, and that the timber is being felled in a forest.

In T J Depiazzi & Sons &. Collector of Customs, Re (1993) 17 AAR 557, the Administrative Appeals Tribunal accepted that milling is the process of subjecting something to the operation of a mill and that a mill is a machine which does its work by rotary motion. Accordingly, the activity of the client constitutes milling.

Therefore it is considered that the client is milling, in a forest, timber which has been felled in the forest which is 'forestry' under paragraph (c) of the definition of forestry in subsection 164(7) of the Customs Act.

Legislative References:
Excise Act 1901
   paragraph 78A(1)(aa)

Case References:
T J Depiazzi & Sons & Collector of Customs, Re
    (1993) 17 AAR 557

Keywords
DFRS forestry
Diesel fuel rebate scheme
Excise

Business Line:  Excise

Date of publication:  15 August 2003

ISSN: 1445-2782