ATO Interpretative Decision

ATO ID 2006/84 (Withdrawn)

Excise

Energy Grants (Credits) Scheme: off-road credit - agriculture - livestock research
FOI status: may be released

This ATO ID has been amended to update the reference to Product Grants and Benefit Ruling PGBR 2005/3.
This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.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.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the keeping of cattle owned by pastoral companies in a feedlot, where they are kept for research and commercial reasons, 'agriculture' as defined in section 22 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes. The keeping of cattle owned by pastoral companies in a feedlot, where they are kept for research and commercial reasons, is 'agriculture' as defined in section 22 of the EGCSA.

Facts

An entity runs a feedlot for livestock.

The entity collects research data and provides standard commercial feedlot services.

The feedlot essentially operates as any normal feedlot, except that equipment has been set up to monitor the feed consumed by selected cattle.

The research activities generally relate to the care and controlled feeding of cattle in accordance with accepted animal management practices, and additional research is carried out on meat samples taken from selected cattle after slaughter.

The cattle that are cared for by the organisation are owned by various pastoral companies, who have reared them for the production of food. The ownership of the cattle remains with the pastoral companies. The entity charges the pastoral companies commercial rates for the agistment, feeding and other costs associated with the operation of the feedlot.

Some cattle are slaughtered and sold once they have achieved the required weight gain, and the proceeds of the sale are paid to the particular pastoral company that owned the cattle. Some are returned to the pastoral company which owns them for further rearing.

The pastoral companies are businesses undertaken to obtain produce for sale as required by the EGCSA.

Reasons for Decision

Subsection 53(1) of the EGCSA provides that subject to the conditions and restrictions specified in the regulations, an entity is entitled to an off-road credit if they purchase or import into Australia off-road diesel fuel for a use by them that qualifies. According to subsection 53(2) of the EGCSA agriculture is a use that qualifies.

Subsection 22(1) of the EGCSA states, in part, that 'agriculture' means:

...

(c)
the rearing of livestock; or
...

Subsection 22(2) of the EGCSA provides a further test:

(2)
The expression agriculture does not include:

(a)
fishing operations or forestry; or

(b)
an activity referred to in subsection (1) (other than hunting or trapping that is carried on for the purposes of a business, including the storage of any carcasses or skins obtained from the hunting or trapping) unless the activity is carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale.

Given the wording of subsections 22(1) and 22(2) of the EGCSA, the entity's activities will fall within the definition of 'agriculture' if they can be considered to be:

•: the 'rearing of livestock', and
•: carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale.

Each test will be considered in turn.

Are the activities the 'rearing of livestock'?

The term 'rearing' is not defined in the EGCSA, and therefore its ordinary meaning must be considered. 'Rear' is defined in the Australian Oxford Dictionary 1999, Oxford University Press, Melbourne, as to:

breed and care for animals

The rearing of livestock includes all activities required to breed, raise and care for the animals for the purpose for which they are being reared, in accordance with accepted commercial animal husbandry and management practices.

The entity in this case is 'rearing' the cattle, as it is caring for them and feeding them in accordance with accepted animal management practices, until they have achieved the required weight gain, so they can be slaughtered and sold.

The term 'livestock' is defined in section 4 of the EGCSA as having a meaning 'affected by subsection 23(2).'

Subsection 23(2) of the EGCSA defines live-stock in the following terms:

The expression live-stock includes any animal reared for the production of food, fibres, skins, fur or feathers, or for its use in the farming of land.

Subsection 23(2) of the EGCSA affects the meaning of live-stock in two ways. Firstly, it clarifies that the term includes 'any animal'. This accords with the ordinary meaning of the term 'live-stock', as per the Australian Oxford Dictionary 1999, Oxford University Press, Melbourne, which defines the term 'live-stock' as:

animals, esp. on a farm, regarded as an asset...

Secondly, subsection 23(2) of the EGCSA limits the definition by requiring that the animal be reared for the production of food, fibres, skins, fur or feathers, or for its use in the farming of the land.

In the context of the definition of 'live-stock' in subsection 23(2) of the EGCSA, the term 'includes' clarifies but does not expand the meaning of live-stock. It clarifies that only those animals that are reared for the production of food, fibres, skins, fur or feathers, or for their use in the farming of land, qualify as live-stock for the purposes of the off-road credits scheme.

As the cattle in the feedlot, regardless of whether they are being reared in part for research purposes, are being reared for the production of food, the cattle are 'livestock' for the purposes of subsection 23(2) of the EGCSA.

Accordingly, the entity's activities constitute the 'rearing of livestock'.

Are the activities carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale?

In this case, the entity conducts its rearing of livestock activities for a number of reasons, including obtaining data that will allow it to undertake research. However, subsection 22(2) of the EGCSA does not require an activity to be carried out solely for the purposes of or for purposes that will directly benefit a business undertaken to obtain produce for sale.

An entity may carry out an activity for a number of purposes and still satisfy the requirements of subsection 22(2) of the EGCSA provided that it can still be said that the activity is carried out for the purpose of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale.

An activity will directly benefit a business undertaken to obtain produce for sale if there is a close and immediate benefit (that is, a positive effect) to the business arising from the activity in question.

Ultimately, the animals that are being reared at the feedlot are owned by businesses undertaken to obtain produce for sale. These businesses obtain a close and immediate benefit from the entity's activities. The benefit would usually be in the form of the sale value of an animal that has been held at the feedlot, but in certain circumstances it may also include the return of an animal in good condition.

Consequently the rearing of livestock at the feedlot is carried out for the purposes of, or purposes that will directly benefit a business, or businesses, undertaken to obtain produce for sale.

Accordingly, the keeping of cattle owned by pastoral companies in a feedlot, where they are kept for research and commercial reasons, is 'agriculture' as defined in section 22 of the EGCSA.

Date of decision: 21 March 2006

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 4
   section 22
   subsection 22(1)
   subsection 22(2)
   subsection 23(2)
   subsection 53(1)
   subsection 53(2)

Related Public Rulings (including Determinations)
Product Grants and Benefit Ruling PGBR 2005/3.

Other References:
The Australian Oxford Dictionary 1999, Oxford University Press, Melbourne

Keywords
EGCS agriculture
EGCS livestock
EGCS off-road
EGCS rearing of livestock

Business Line: Indirect Tax

Date of publication: 24 March 2006

ISSN: 1445-2782

history

	Date:	Version:
	21 March 2006	Original statement
You are here	1 July 2012	Archived

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