ATO Interpretative Decision

ATO ID 2004/686 (Withdrawn)

Excise

• This ATO ID is withdrawn as it is superseded by Product Grants and Benefits Ruling PGBR 2005/1.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the loading and unloading of timber from a stockpile at a sawmill or chipmill, where the loading and unloading is necessarily incidental to the milling of the timber at the sawmill or chipmill, the 'milling of timber' as required by paragraph 35(d) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes, the loading and unloading of timber from a stockpile at a sawmill or chipmill, where the loading and unloading is necessarily incidental to the milling of the timber at the sawmill or chipmill, is the 'milling of timber' as required by paragraph 35(d) of the EGCSA.

Facts

An entity operates a sawmill outside the forest where the timber was felled.

The timber is brought to the site of the sawmill from the forest and unloaded onto a stockpile by the entity's diesel powered equipment.

Once ready for milling, the equipment is used to load the timber from the stockpile, taking it to the production line to be milled.

Reasons for Decision

Under subsection 53(1) of the EGCSA, an entity is entitled, subject to certain prescribed preconditions, to an off-road credit if they purchase diesel fuel for a use by them that qualifies, including 'primary production'.

Primary production is defined in section 21 of the EGCSA as meaning, in part, forestry. 'Forestry' is then defined in section 35 of the EGCSA.

The definition of forestry in section 35 of the EGCSA covers a number of activities, the most pertinent of which is contained in paragraph 35(d) which states that forest includes:

The milling of timber at a sawmill or chipmill that is not situated in the forest or plantation in which the timber was felled.

The meaning of the phrase 'milling of timber' has been considered a number of times by the Administrative Appeals Tribunal (AAT) in relation to the Diesel Fuel Rebate Scheme (DFRS) The DFRS was the immediate precursor to the Energy Grants (Credits) Scheme (EGCS and was administered under the Customs Act 1901 and the Excise Act 1901. The DFRS relied on a definition of 'forestry' identical to that contained in the EGCSA, so those decisions are still considered relevant.

The phrase 'milling of timber' was first considered for the DFRS in Re Wesfi Pty Ltd v. Collector of Customs (WA) No. 84/46 7 ALN N8 (Wesfi) where the AAT accepted the ordinary meaning of the term 'milling' as follows:

The Shorter Oxford English Dictionary gives this relevant meaning of "milling":

the action or process of subjecting something to the operation of a mill, as corn, etc. b. The treatment of a substance or material in any kind of mill; e.g. the operation of fulling cloth, rolling metals, crushing minerals etc.'

This approach was subsequently adopted in Re TJ Depiazzi and Sons v. Collector of Customs No. W92/114 AAT No. 8770 (1993) 17 AAR 557 and again in Re Brymay Forests Pty Ltd v. Collector of Customs Victoria No. V85/305 AAT No. 2496; (1985) 9 ALN N177 (Brymay) when the AAT determined, in part, that the use of a diesel powered front-end grab tractor to take logs from the log stack to the production line where they are milled was also milling of timber. The AAT reached this conclusion in Brymay as:

...the front-end grab tractor or tractors are used exclusively in relation to the saw milling operations... Their use is necessarily incidental to those operations.

Thus, it is clear from Brymay that the milling of timber is not limited to the actual subjection of the timber to the mill, but includes activities necessarily incidental to the process of milling timber. However, 'the milling of timber' does not extend so far as to include activities more properly regarded as secondary processing.

In this instance, timber is brought to the site of the sawmill from the forest and unloaded onto a stockpile by diesel powered equipment, prior to milling. Once ready for milling, the equipment is used to load the timber from the stockpile, taking it to the production line where it is to be milled. This process is similar to that considered to be part of the milling of timber in Brymay.

The entity's use of equipment to load and unload the timber from the stockpile at the sawmill in this case is a use that is necessarily incidental to the entity's sawmilling operations and therefore constitutes the 'milling of timber' as required by paragraph 35(d) of the EGCSA.

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 21
   paragraph 35(d)
   section 35
   subsection 53(1)

Case References:
Re Wesfi Pty Ltd v. Collector of Customs
    (WA) No. W84/46 (1984) 7 ALN N8

Related ATO Interpretative Decisions
ATO ID 2003/814
ATO ID 2004/465

Keywords
EGCS forestry
EGCS milling

Business Line:  Excise

Date of publication:  20 August 2004

ISSN: 1445-2782