ATO Interpretative Decision

ATO ID 2006/46 (Withdrawn)

Excise

• This ATO ID is withdrawn as the issue under consideration is addressed in Product Grants and Benefits Ruling PGBR 2005/1.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the transportation of oil mallee leaves and branches to a processing plant situated outside of the plantation for chipping, forestry as defined in paragraph 35(e) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes. The transportation of oil mallee leaves and branches to a processing plant situated outside of the plantation for chipping, is forestry as defined in paragraph 35(e) of the EGCSA.

Facts

An entity grows oil mallees in a plantation. Oil mallees are multi-stemmed species of eucalypt trees with a high leaf cineole concentration.

Oil mallees, including the leaves and branches are timber for the purposes of section 35 of the EGCSA.

The entity fells the trees, stripping the branches and leaves from the stems. The entity then transports the leaves and stems to a processing plant situated outside of the plantation where they are chipped using a rotary action chipping machine.

The chipped material is then separated into leaf and wood components. The leaf component is fed into a still to extract cineole for use in the production of eucalyptus oil. The wood component is combusted into charcoal for use in other secondary production processes.

Reasons for Decision

The term forestry is defined in section 35 of the EGCSA as:

The expression forestry means:

(a)

the planting or tending, in a forest or plantation, of trees intended for felling; or

(b)

the thinning or felling, in a forest or plantation, of standing timber

and includes:

...

(e)

where timber is milled at a sawmill or chipmill that is not situated in the forest or plantation in which the timber was felled - the transporting of the timber from the forest or plantation in which it was felled to the sawmill or chipmill

...

In TJ Depiazzi & Sons v. Collector of Customs (1993) 17 AAR 557 (Depiazzi), the Administrative Appeals Tribunal (Tribunal) accepted the description of 'milling' and 'mill' adopted by the Tribunal in Westfi Pty Ltd v. Collector of Customs (1984) 7 ALN N8. It said that 'milling' is the process of subjecting something to the operation of a mill and a mill is a machine which does its work by rotary motion.

The Tribunal found that a mill can be fixed or housed in a building or it can be moveable and designed to function at different locations. The emphasis is on function rather than the environment in which the function occurs.

To be a mill it is not necessary for the operation to be a certain size or take a particular standard form. In essence a machine which mills must be a mill. A mill which engages in a process of milling involving a substantial, though not necessarily predominant, proportion of chipping timber or parts of timber is a chipmill.

In this instance timber is subjected to the actions of a machine located at the processing plant. As that machine does its work by rotary motion it falls within the ordinary concept of a mill.

The Tribunal reasoned that 'chipping' refers to one of the reduction processes through which tree parts and residue are broken down to a state where they become material capable of use in other productive activities.

As the leaves and branches of the oil mallees are being milled at a mill used exclusively to reduce them to a smaller size and shape for use in the production of eucalyptus oil and charcoal they are being chipped at a chipmill.

As the oil mallee leaves and branches are being milled at a chipmill situated outside of the plantation, the transportation of the timber to the chipmill is forestry as defined in paragraph 35(e) of the EGCSA.

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

Case References:
Wesfi Pty Ltd & Collector of Customs (WA), Re
   (1984) 7 ALN N8

Related ATO Interpretative Decisions
ATO ID 2006/45

Keywords
EGCS forestry
EGCS forestry transportation of timber
Energy grants (credits) scheme

Business Line:  Excise

Date of publication:  24 February 2006

ISSN: 1445-2782