ATO Interpretative Decision

ATO ID 2004/764

Excise

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Issue

Is the loading of bins of woodchips onto trucks the 'milling of timber' as required by the definition of 'forestry' in section 35 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

No. The loading of bins of woodchips onto trucks is not the 'milling of timber' as required by the definition of 'forestry' in section 35 of the EGCSA.

Facts

After all the standing timber has been felled in an area, the remaining non-merchantable trees, logs, stumps and branches are placed into windrows.

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

The entity mills the timber by:

(a)

removing timber that meets certain specifications from the windrows

(b)

using excavators fitted with shears to down size the timber

(c)

feeding the timber into a mobile chipmill, and

(d)

loading the woodchips into bins via a conveyor belt system.

The entity then loads the bins onto trucks ready to be transported.

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. The definition of 'forestry' in section 35 of the EGCSA includes:

(c)

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

(d)

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 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 (1984) 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.

In this instance the process of chipping the timber at a mobile chipmill clearly involves the action or process of subjecting something to the operation of a mill, and therefore constitutes the milling of timber as required by paragraph 35 of the EGCSA.

The approach taken in Wesfi was subsequently adopted in Re T J Depiazzi and Sons and Collector of Customs NSW 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, the removal of timber from the windrows, the use of shears to downsize the timber, the feeding of the timber into the mobile chip mill and the activity of loading the woodchips into bins via a conveyor belt system constitute the 'milling of timber'.

However, once the woodchips are have been loaded into the bins, the milling of timber has ceased. Consequently, the loading of the bins onto trucks so it can be transported is not necessarily incidental to the milling of timber and therefore does not constitute the 'milling of timber as required by section 35 of the EGCSA and therefore is not 'forestry'.

Therefore, the loading of bins of woodchips onto trucks is not the 'milling of timber' as required by the definition of 'forestry' in section 35 of the EGCSA.

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

Case References:
Re Wesfi Pty Ltd v. Collector of Customs (WA)
    No. 84/46 (1984) 7 ALN N8

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 2004/763

Keywords
EGCS forestry
EGCS milling
EGCS off-road

Business Line:  Indirect Tax

Date of publication:  17 September 2004

ISSN: 1445-2782