ATO Interpretative Decision

ATO ID 2004/763 (Withdrawn)

Excise

Energy Grants (Credits) Scheme: off-road - forestry - processing of timber
FOI 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This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.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.

Status of this decision: Decision Withdrawn 1 July 2012

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 screening of woodchips to clean and sort the chips into products suitable for use in an industrial process the 'processing, in a forest or plantation, of timber felled in that forest or plantation' as required by paragraph 35(c) of the definition of 'forestry' in the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

No. The screening of woodchips to clean and sort the chips into products suitable for use in an industrial process is not the 'processing, in a forest or plantation, of timber felled in that forest or plantation' as required by paragraph 35(c) of the definition of 'forestry' in the EGCSA.

Facts

An entity has entered into agreements to access waste timber and process it into products suitable for use in an industrial process.

The entity mills the timber into woodchips in one location, and then transports the woodchips to another location where they will be screened and sorted prior to being loaded onto trucks to be taken away for use in the industrial process.

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 (otherwise than for the purpose of propelling a road vehicle on a public road).'

'Primary production' is defined in section 21 of the EGCSA as meaning, in part, forestry. 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(c) which states that 'forestry' includes:

(c): the ..... processing ... in a forest or plantation, of timber felled in the forest or plantation; or ...

Therefore, the first test that needs to be considered is whether or not the wood chips constitute 'timber' for the purposes of paragraph 35(c) of the EGCSA.

The meaning of the word 'timber' was considered by the Administrative Appeals Tribunal (AAT) for the purposes of the Diesel Fuel Rebate Scheme (DFRS) in Re T J Depiazzi and Sons and Collector of Customs NSW No. W92/114 AAT No. 8770 (1993) 17 AAR 557 (Depiazzi). The DFRS was the immediate precursor to the Energy Grants (Credits) Scheme 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.

In Depiazzi, the AAT considered whether the chipping of raw waste materials obtained from sawmills constituted the milling of timber for the purposes of the (DFRS). After chipping, some of the woodchips were blended with other materials to make potting mix. The AAT determined that any product that:

Originally was a constituent of a tree that has been felled is capable of fitting the notion of 'timber' ... throughout the course of events when it is subject to a process of further reduction in size and shape up to the point where the basic constituent material, in reduced or separated form, is subjected to a secondary process or treatment.

The AAT concluded that the raw waste materials obtained from sawmills that were to be milled at a chipmill constituted timber.

Consequently, a determination of whether a product is timber requires a careful examination of the processes it undergoes.

In this instance the timber has already been milled to produce woodchips and will undergo no further reduction in size and shape. The woodchips are being transported so that they can be screened to clean and sort the chips into products suitable for use in an industrial process. The cleaning and sizing of the wood chip into the types of products suitable for use in an industrial process is similar to the treatment of woodchips to produce fertiliser in Depiazzi as these activities occur after the milling is complete and prepare the wood chips specifically for use in secondary activities. Consequently, these processes are more properly regarded as a secondary treatment or process that occurs after the milling of the timber is complete.

As the woodchips have completed the milling process, and are in a state where they are ready to undergo secondary processing, the woodchips are not 'timber' for the purposes of section 35 of the EGCSA.

As the woodchips are not 'timber', the screening of woodchips to clean and sort the chips into products suitable for use in an industrial process is not the 'processing, ... in a forest or plantation, of timber felled in that forest or plantation' as required by paragraph 35(c) of the definition of 'forestry' in the EGCSA.

Date of decision: 24 June 2004

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

Case References:
Re T J Depiazzi and Sons and Collector of Customs NSW
No. W92/114 AAT No. 8770 (1993) 17 AAR 557

Related Public Rulings (including Determinations)
PGBR 2004/D2 Energy Grants: off-road credits for forestry

Related ATO Interpretative Decisions
ATO ID 2004/737
ATO ID 2004/738
ATO ID 2004/764

Keywords
EGCS forestry
EGCS milling
EGCS off-road
Energy grants (credits) scheme
Excise
Excise payments

Business Line: Indirect Tax

Date of publication: 17 September 2004

ISSN: 1445-2782

history

	Date:	Version:
	24 June 2004	Original statement
You are here →	1 July 2012	Archived

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