ATO Interpretative Decision

ATO ID 2004/780 (Withdrawn)

Excise

Diesel Fuel Rebate Scheme: agriculture - earthworks on a property not yet an agricultural property
FOI status: may be released

This ATO ID is withdrawn from the database because it contains a view in respect of the diesel fuel rebate provisions of the Excise Act 1901 and or the Customs Act 1901 that were repealed with effect from 1 July 2003. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions for fuel purchased before 1 July 2003.

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

Status of this decision: Decision Withdrawn 8 January 2010

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Are earthworks carried out to establish a farm 'agriculture' as defined in subsection 164(7) of the Customs Act 1901, for the purposes of the Diesel Fuel Rebate Scheme (DFRS)?

Decision

No. Earthworks carried out to establish a farm are not 'agriculture' as defined in subsection 164(7) of the Customs Act, for the purposes of the DFRS.

Facts

An entity carries out earthworks on an area of land which is being developed for use as a farm on which a business of rearing live-stock will be carried on with a view to obtaining produce for sale. However, no farming activities have yet commenced on the property.

Reasons for Decision

Under subsection 78A(1) of the Excise Act 1901 and subsection 164(1) of the Customs Act, a diesel fuel rebate is payable to a person who purchases diesel fuel for use by them in 'agriculture'.

'Agriculture' is defined for the purposes of both Acts in subsection 164(7) of the Customs Act. 'Agriculture' means (subject to certain exclusions) various activities including:

(r)

the carrying out of earthworks for use in a core agricultural activity if the earthworks:

(i): are carried out on the agricultural property where the core agricultural activity is carried on; and
(ii): are carried out by the person who carries on the core agricultural activity or by a person contracted by that person to carry out the earthworks

For an activity to meet the definition of agriculture in subsection 164(7) of the Customs Act, it is also necessary that the activity be carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale.

Therefore, the earthworks will be agriculture for the purposes of subsection 164(7) of the Customs Act if they are:

•: for use in a core agricultural activity
•: carried out on the agricultural property where that core agricultural activity is carried on
•: carried out by the person who carries on the core agricultural activity or a person contracted by that person, and
•: carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale.

Each test will be considered in turn.

1. Are the earthworks for use in a 'core agricultural activity'?

The term 'core agricultural activity' is defined in subsection 164(7) of the Customs Act, and means any of the following activities:

(a): the cultivation of the soil
(b): the cultivation or gathering in of crops
(c): the rearing of live-stock, or
(d): viticulture, horticulture, pasturage or apiculture

provided they are carried out for the purposes of, or for purposes that will directly benefit a business undertaken to obtain produce for sale.

In this case, the earthworks will be used in the core agricultural activity of rearing live-stock. The rearing of live-stock will be undertaken in the course of a business with a view to obtaining produce for sale. Therefore, the first test is satisfied.

2. Are the earthworks being carried out on the agricultural property where that core agricultural activity is carried on?

The Customs Act specifically requires that the earthworks be carried out on the agricultural property where the core agricultural activity the earthworks will be used in, is carried on.

Therefore, what must firstly be determined is whether this area of land is an 'agricultural property'.

The term 'agricultural property' is not defined in the Customs Act. The issue of what constitutes an agricultural property for the purposes of the DFRS was considered by the Administrative Appeals Tribunal (AAT) in Raymond Cedric and Brian Richard Wallace v. CEO of Customs [1998] AATA 633 (25 June 1998); (1998) 27 AAR 430 (Wallace).

Wallace is authority for the view that an agricultural property is a property on which a core agricultural activity or a mixture of these activities are carried out for the purpose of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale.

In this case, the property is a new property being prepared and developed to allow a core agricultural activity to be carried out on the property. As the property is not a property on which a core agricultural activity is carried out, it is not an 'agricultural property' for the purposes of the Customs Act 1901. Therefore, the second test is not satisfied and it is unnecessary to consider the remaining tests.

Accordingly, earthworks carried out to establish a farm are not 'agriculture' as defined in subsection 164(7) of the Customs Act, for the purposes of the DFRS.

Date of decision: 23 July 2004

Legislative References:
Customs Act 1901
subsection 164(1)
subsection 164(7)

Excise Act 1901
subsection 78A(1)

Case References:
Raymond Cedric and Brian Richard Wallace v. CEO of Customs (25 June 1998)
[1998] AATA 633
(1998) 27 AAR 430

Keywords
Diesel Fuel Rebate Scheme
DFRS agriculture

Business Line: Excise

Date of publication: 24 September 2004

ISSN: 1445-2782

history

	Date:	Version:
	23 July 2004	Original statement
You are here →	8 January 2010	Archived

Copyright notice

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).