ATO Interpretative Decision

ATO ID 2005/296 (Withdrawn)

Excise

Energy Grants (Credits) Scheme: forestry - infield wood chipping operations
FOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Does the maintenance of a woodchip stockpile at the site of infield wood chipping in a forest or plantation fall within the definition of 'forestry' in section 35 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes. The maintenance of a woodchip stockpile at the site of infield wood chipping in a forest or plantation falls within the definition of 'forestry' in section 35 of the EGCSA.

Facts

A contractor carries out infield wood chipping in a forest or plantation.

Timber is chipped in wood chipping plant and the woodchips are moved to a stockpile on site prior to transportation out of the forest by truck.

The contractor uses eligible fuel in a front end loader in carrying woodchips from the chipping plant to a stockpile and in organising the stockpile to prevent it from spreading too wide.

Reasons for Decision

The definition of 'forestry' in section 35 of the EGCSA includes, at paragraph (c), the transporting, milling or processing in a forest or plantation of timber felled in the forest or plantation.

Infield wood chipping is the milling or processing of timber in a forest or plantation.

Product Grant and Benefit Ruling PGBR 2005/1 states:

154. We consider that the milling of timber is not limited to the actual subjection of the timber to the sawing or chipping activity at the mill, but it includes activities that are integral to, or necessarily incidental to, the process of milling timber. However it does not include activities regarded as secondary manufacture.

At paragraph 156 of PGBR 2005/1, the ruling states in example 5 that the movement of logs by forklift to a stockpile at a forest mill for drying prior to sawing is necessarily incidental to the process of milling or processing timber, as it is necessary to make the logs suitable for debarking and sawing. The drying process and movement of logs are activities in milling or processing the timber.

In this case, woodchips are carried from the chipping plant by front-end loader and stockpiled on site. Also, the front-end loader is used to organise the stockpile and prevent it from spreading too wide.

Similar to example 5 in PGBR 2005/1, these activities are necessarily incidental to the milling process. Without them, the in-field chipping operation would not be able to function, or function efficiently. They are therefore considered to be activities in milling or processing the timber.

Note: This decision does not apply where the stockpile is made at a location other than the chipping site.

Date of decision:  24 October 2005

Year of income:  Year ended 30 June 2004 Year ended 30 June 2005 Year ending 30 June 2006

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 35
   paragraph 35(c)

Related Public Rulings (including Determinations)
Product Grants and Benefits Ruling PGBR 2005/1

Related ATO Interpretative Decisions
ATO ID 2004/764

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

Business Line:  Excise

Date of publication:  28 October 2005

ISSN: 1445-2782

history
  Date: Version:
  24 October 2005 Original statement
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