ATO Interpretative Decision

ATO ID 2006/116

Excise

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

Issue

Is diatomite a mineral for the purposes of determining what constitutes mining operations as defined in section 11 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes. Diatomite is a mineral for the purposes of determining what constitutes mining operations as defined in section 11 of the EGCSA.

Facts

The entity operates a mining operation recovering diatomite. Diatomite is the fossilised skeletal remains of microscopic single-elled plants called diatoms. Diatoms exist in all salt and fresh waters of the Earth and have the unique ability to absorb water-soluble silica present in their natural environment to form a highly porous, yet rigid, skeletal framework of amorphous silica.

Throughout time, the remains of diatoms settled and were joined by successive generations forming deep-bedded deposits on ocean and lake floors.

In a few regions of the Earth, the diatomite deposits formed in sufficient thickness and purity to be mined. Diatomite is generally mined by open-pit quarrying techniques using conventional, heavy duty earth moving equipment and is then transferred to a processing plant. Diatomite is processed by being milled, dried and possibly fired in a kiln (calcining) to make it ready for domestic and commercial applications.

Diatomite has many uses. It is an excellent filtering agent and used in the manufacture of things like antibiotics, beer, chemicals, edible oils and fats, fruit juices and other goods. It is used in horticultural potting mix and soil conditioner and, because of its high absorbent qualities and lightweight nature, as an absorbent to cleanup hazardous wastes, oil and grease. It is also an exceptional carrier for active ingredients and diluents and used in the manufacture of pesticides.

A typical chemical analysis of diatomite (dried 500oc) would show as follows:

Reasons for Decision

'Mining operations' is an eligible activity for the purposes of the Energy Grants (Credits) Scheme. Paragraph 11(1)(b) of the EGCSA defines the term as meaning the operations for the recovery of minerals.

Section 20 of the EGCSA provides the following definition of minerals:

The expression minerals means minerals in any form, whether solid, liquid or gaseous and whether organic or inorganic, except:

(a)

sand, sandstone, soil, slate, clay (other than bentonite or kaolin), basalt, granite, gravel or water; or

(b)

limestone (other than agricultural use limestone).

Product Grants and Benefits Ruling PGBR 2005/2 accepts the common law view that 'minerals' are the denotation of substances that can be won by mining.

The Macquarie Dictionary, 2001, rev. 3^rd edn, The Macquarie Library Pty Ltd, NSW defines 'mineral' as 'a substance obtained by mining'. Therefore, a factor to be considered in determining if a substance is a mineral is whether the extraction or recovery process would correspond to the normal understanding of the term 'mining'.

As 'mining' is not defined in the EGCSA its ordinary meaning prevails. PGBR 2005/2 advises that this is the action, process or industry of extracting minerals or ores bearing minerals from a mine or mines. A 'mine' means an excavation made in the earth for the purposes of getting out minerals (including coal), ores or, precious stones, or a deposit of such minerals, ores or precious stones, either below the ground or at its surface.

Diatomite is a mineral, as commonly understood, as it is a substance obtained by mining, being extracted from the earth by a process of excavation with the use of heavy equipment.

However, diatomite is only a mineral for the purposes of the EGCSA if it is not one of the minerals that are specifically excluded by section 20 of the EGCSA.

The exclusion of those substances from the definition of 'minerals' was introduced into the previous off-road scheme by the Customs and Excise Legislation Amendment Act 1995 No. 87 of 1995. The explanatory memorandum stated:

The purpose of the amendment proposed in this item is to exclude from eligibility for the payment of rebate diesel fuel for use in extracting certain materials from the ground because they are valuable as extracted, rather than for the purpose of recovering their inherent mineral qualities. For example the use of diesel fuel in the mining of sand for its use in concreting, rather than for the purpose of extracting the minerals contained in the sand, is to be excluded from eligibility for rebate.

Although diatomite is primarily comprised of silica, which can appear as sand, it also contains other elements which broaden its range of uses. Diatomite requires further processing after extraction to utilise its inherent qualities for use in a range of domestic or commercial applications. Diatomite is also mined for its use in a range of applications because of its super-absorbency. Hence, in terms of its constituents, manner of processing and uses, diatomite can be contrasted from sand.

Accordingly, diatomite is not 'sand' for the purposes of the EGCSA and is a mineral for the purposes of mining operations as defined in section 11 of the EGCSA.

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 11
   paragraph 11(1)(b)
   section 20

Related ATO Interpretative Decisions
ATO ID 2004/877

Keywords
EGCS minerals
EGCS mining operation
EGCS off-road
Energy grants (credits) scheme
Excise
Excise payments

Business Line:  Indirect Tax

Date of publication:  28 April 2006

ISSN: 1445-2782