ATO Interpretative Decision

ATO ID 2006/86 (Withdrawn)

Excise

Energy Grants (Credits) Scheme: off-road - forestry -off-cuts from trees that have been milled are timber
FOI status: may be released

This ATO ID is withdrawn from 1 July 2012, the date the Energy Grants (Credits) Scheme Act 2003 was repealed.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Are the off cuts from timber that has already been milled timber for the purposes of section 35 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes. The off cuts from timber that has already been milled are timber for the purposes of section 35 of the EGCSA.

Facts

Trees felled in a forest are milled by an entity at a saw mill which is situated in the forest in which the trees are felled. The entity mills the timber to square off the logs and then saw them to standard sizes.

The milling process produces off-cuts that consist of bark, branches and parts of the trunk.

To maximise its yield from the felled trees, the entity transports the off cuts to a chip mill, situated outside of the forest in which the timber is felled. There the off-cuts are chipped down into a size and shape suitable for use in the manufacture of chipboard.

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

The meaning of the expression forestry as defined in section 35 of the EGCSA includes:

(c)
the transporting, milling or processing, in a forest or plantation, of timber felled in the forest or plantation; or

(d)
the milling of timber at a sawmill or chipmill that is not situated in the forest or plantation in which the timber was felled; or

(e)
where timber is milled at a sawmill or chipmill that is not situated in the forest of 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; or
...

The meaning of the word 'timber' was considered by the Administrative Appeals Tribunal (Tribunal) in Re T J Depiazzi and Sons and Collector of Customs NSW (1993) 17 AAR 557 (Depiazzi) when it considered whether the chipping of raw waste materials obtained from sawmills constituted the milling of timber for the purposes of the diesel fuel rebate scheme.

The diesel fuel rebate scheme was the immediate precursor to the energy grants credits scheme and was administered under the Customs Act 1901 and the Excise Act 1901. The Explanatory Memorandum to the EGCSA states that the energy grants credits scheme is to provide equivalent entitlements to those of the diesel fuel rebate scheme. Therefore the decision in Depiazzi is still considered relevant and can be applied to the current situation.

In Depiazzi the Tribunal determined at paragraph 24 that any product that:

... originally was a constituent of a tree that has been felled is capable of fitting the notion of 'timber' within paragraph (d) throughout the course of events when it is subject to a process of further reduction in size and shape up to the point where the basic constituent material, in reduced or separated form, is subjected to a secondary process or treatment.

The Tribunal concluded that the raw waste materials obtained from sawmills that were to be milled at a chipmill constituted timber.

In this instance, the off cuts were originally constituents of trees and are put through a process that will result in their further reduction in size and shape. Accordingly, as in Depiazzi, the off cuts used by the entity in its activities are timber for the purposes of section 35 of the EGCSA.

Date of decision: 20 March 2006

Legislative References:
Energy Grants (Credits) Scheme Act 2003
section 21
section 35

Case References:
TJ Depiazzi and Sons and Collector of Customs NSW
(1993) 17 AAR 557

Related Public Rulings (including Determinations)
Product Grants and Benefits Ruling PGBR 2005/1

Related ATO Interpretative Decisions
ATO ID 2006/85

Keywords
EGCS forestry
EGCS milling

Business Line: Indirect Tax

Date of publication: 24 March 2006

ISSN: 1445-2782

history

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

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