ATO Interpretative Decision

ATO ID 2005/56 (Withdrawn)

Excise

Energy Grants (Credits) Scheme: off-road - forestry - road built at edge of a forest
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Is a road which is built out into the water at the edge of a forest 'in' a forest for the purposes of paragraph 35(f) of the definition of 'forestry' in section 35 of the Energy Grants Credits Scheme Act 2003 (EGCSA)?

Decision

Yes. A road which is built out into the water at the edge of a forest is 'in' a forest for the purposes of paragraph 35(f) of the definition of 'forestry' in section 35 of the EGCSA.

Facts

An entity carries out forestry as defined in section 35 of the EGCSA. As part of those forestry operations it builds and maintains roads in a forest that are integral to an activity referred to in paragraph 35(a) or 35(b) or 35(c) of the definition of 'forestry' in section 35 of the EGCSA. These roads are not public roads.

One of the roads extends beyond the natural edge of the forest and then over the water. Ships are able to berth at the end of this road for the purpose of loading unprocessed forest timber for transportation to the mill.

This road is integral to the activities set out in paragraphs 35(a), 35(b) and 35(c) of the definition of forestry in section 35 of the EGCSA.

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, including, at paragraph 35(f):

(f)
the making and maintaining of a road in a forest or plantation ... that is integral to the activities referred to in paragraph (a), (b) or (c).

The activities referred to in paragraphs 35(a), 35(b) and 35(c) of the EGCSA are:

•
the planting or tending, in a forest or plantation, of trees intended for felling
•
the thinning or felling in a forest or plantation of standing timber, and
•
the transporting, milling or processing, in a forest or plantation, of timber felled in the forest or plantation.

It is accepted that the 'road' includes the berth and that it is integral to the activities set out in paragraphs 35(a), 35(b) and 35(c) of the definition of forestry in section 35 of the EGCSA.

However, it needs to be determined if a road which is built out into the water at the edge of a forest is 'in' the forest as required by paragraph 35(f) of the definition of forestry in section 35 of the EGCSA.

As the definition of forestry in section 35 of the EGCSA allows for activities such as the transport of timber, the milling of timber and the processing of timber provided they occur within a forest, it is clear not every hectare of land considered to be a 'forest' needs to be covered by trees. A 'forest' will also include areas of land devoted to the transport of timber, the milling of timber and the processing of timber.

In this instance, although the road extends out into the water and is not in an area of land covered in trees the following factors point to the extension of the road being 'in' the forest:

•
the transport of timber is an activity which is integral to forestry
•
the road extension is integral to the land devoted to the transport of timber within the forest
•
the road extension forms a part of the land managed by an entity engaged in forestry operations for the purposes of forestry as defined in section 35 of the EGCSA
•
the forest extends to the water, and
•
the road extension is a component in the system which constitutes the 'forest' in these circumstances.

Accordingly, it is considered that the road is 'in' a 'forest' for the purposes of paragraph 35(f) of the definition of 'forestry' in section 35 of the EGCSA.

Date of decision:  3 February 2005

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

Related Public Rulings (including Determinations)
Product Grant and Benefit Ruling 2004/D2 Energy Grants: off-road credits for forestry

Keywords
EGCS forest
EGCS forestry
EGCS forestry road making and maintenance
EGCS forestry transportation of timber
EGCS off-road
EGCS primary production
EGCS thinning or felling
Energy grants (credits) scheme

Business Line:  Indirect Tax

Date of publication:  18 February 2005

ISSN: 1445-2782

history
  Date: Version:
  3 February 2005 Original statement
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