ATO Interpretative Decision

ATO ID 2006/83 (Withdrawn)

Excise

• This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.
  Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of the period the Act was in force, 1 July 2003 up to and including 30 June 2012.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the movement, by an entity, of fencing materials stored on the entity's farm, to a paddock on the farm where the fence is to be constructed, 'the construction or maintenance of fences' for the purposes of paragraph 25(a) of the Energy Grants Credits Scheme Act 2003 (EGCSA)?

Decision

Yes. The movement, by an entity, of fencing materials stored on a farm to a paddock where the fence is to be constructed is 'the construction or maintenance of fences' for the purposes of paragraph 25(a) of the EGCSA.

Facts

An entity carries on a core agricultural activity.

The entity stores fencing materials on their agricultural property (farm).

When constructing fences on the farm, the entity transports fencing materials stored on the farm to the construction site located on the farm.

The fences are for use in the entity's core agricultural activity.

Reasons for Decision

Subject to various conditions, section 53 of the EGCSA allows an off-road credit for the purchase of diesel fuel for use 'in primary production'. The term 'primary production' is defined in section 21 of the EGCSA to mean a number of activities, one of which is agriculture. Therefore, in effect, an off-road credit is allowed if diesel fuel is purchased for use 'in agriculture'.

Section 22 of the EGCSA defines the term 'agriculture' to mean the following activities:

•

the cultivation of the soil

•

the cultivation or gathering in of crops

•

the rearing of live-stock, or

•

viticulture, horticulture, pasturage or apiculture.

According to section 31 of the EGCSA these activities are also termed 'core agricultural activities' when they are carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale.

The definition of agriculture is further expanded by the inclusion of a number of specific activities.

One specific activity included within the definition of agriculture is 'an agricultural construction activity' which is defined in section 25 of the EGCSA to mean various activities including:

(a)

the construction or maintenance of fences undertaken:

(i)

by a person who carries on a core agricultural activity; or

(ii)

by a person contracted by that person to carry out the construction or maintenance

on the agricultural property where the core agricultural activity is carried on...

In this instance, the entity is carrying on a core agricultural activity. The entity is building a fence on the farm where the core agricultural activity is carried on. Therefore, the construction of the fence is accepted as meeting the requirements specified in paragraph 25(a) of the EGCSA. The issue to be determined is whether the transportation of the fencing materials by the entity from a storage place on the farm to a paddock on the same farm can be considered part of the 'construction or maintenance of fences'.

There is no specific provision within the EGCSA that sheds light on whether the transportation described above forms part of the construction of the fence.

When considering whether a particular activity takes place 'in' something, the courts in Federal Commissioner of Taxation v. Payne (2001) 202 CLR 93; 2001 ATC 4027; (2001) 46 ATR 228 Chief Executive Officer of Customs v. WMC Resources Ltd (as agent for East Spar Alliance) 87 FCR 482; Re Wandoo Alliance Pty Ltd and Chief Executive Officer of Customs [2001] AATA 801, amongst others, deemed it pertinent to consider one or all of the following factors when determining whether an activity is undertaken 'in the course of' something:

•

a causal link exists - in other words, a certain activity is 'functionally integrated' with agriculture, thereby forming an essential part of it; and

•

a spatial link exists - meaning that an activity takes place in an area set aside or occupied for agriculture; and

•

a temporal link exists - the activity takes place in a timely fashion, not prior to, or after the completion of, the agricultural activity.

The relevance or weighting afforded to these criteria will vary depending on the facts of each case. Each test will be considered in turn.

Causal Link

The transportation of fencing materials by an entity from a storage place on the farm to the paddock on the same farm where the fence is being built can be accepted as being functionally integrated with the construction of the fence. An entity will not necessarily know which part of their farm will require fencing at any particular time, so the storing of fencing materials on the farm and the transportation of the materials to the particular point where they are required on a given day is necessary to enable the entity to carry out their fencing activities in an efficient, timely manner.

Spatial Link

The transportation of the materials from one part of the farm to another part of the farm also has a strong spatial linkage with the construction of the fence. At all times, the fencing materials are present on the farm. Their storage enables the materials to be drawn on as and when required by the entity.

Temporal Link

It could be argued that the transportation of materials to enable construction to take place occurs prior to the construction, rather than forming part of the construction. However, in this instance, for the reasons outlined above, there are practical reasons for storing the fencing materials in a central point on the farm, and transporting them to the particular site on the farm where they are needed.

Conclusion

The transportation of the materials from a farm shed to the construction site is accepted as having a strong causal and spatial link to the construction of the fences. While the temporal linkage is tenuous, the strength of the other two linkages is considered sufficient to conclude, on balance, the transportation of the fencing materials by an entity from a farm shed to the farm paddock where the fence is to be constructed is the 'construction or maintenance of fences' for the purposes of paragraph 25(a) of the EGCSA.

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 21
   section 22
   section 25
   paragraph 25(a)
   section 31
   section 53

Case References:
Federal Commissioner of Taxation v. Payne
   (2001) 202 CLR 93
   2001 ATC 4027
   (2001) 46 ATR 228

Keywords
EGCS agricultural construction activity
EGCS agriculture
EGCS primary production
EGCS off-road

Business Line:  Indirect Tax

Date of publication:  24 March 2006

ISSN: 1445-2782