Edited version of your written advice

Authorisation Number: 1013028564586

Date of advice: 20 June 2016

Ruling

Subject: Conservation Tillage Offset

Question

Can the taxpayer claim the Conservation Tillage Offset under the repealed Subdivision 385-J of the Income Tax Assessment Act 1997 ("ITAA 1997") for the period up to 30 June 20yy in the taxpayer's income tax return for the period January 20yy to December 20yy?

Answer

No

This ruling applies for the following period:

December 20yy

Relevant facts and circumstances

Background

The Conservation Tillage Offset ("Offset") was introduced on 2 April 2012 by the Clean Energy (Consequential Amendments) Act 2011 to provide a refundable tax offset for certain new depreciating assets used in conservational tillage farming practices. The Offset was contained in Subdivision 385-J of the ITAA 1997 and was intended to apply to the 2012 - 13 to 2014 - 15 income years. It was part of the then Government's Carbon Farming Futures program. The amount of the Offset was 15% of the cost of the depreciating asset.

Subdivision 385-J of the ITAA 1997 was repealed by Schedule 3 to the Clean Energy Legislation (Carbon Tax Repeal) Act 2014 (Cth) ("Repeal Act"), which commenced on 18 July 2014. The Repeal Act specifically states that the entire Subdivision is repealed for the 2014 - 15 income year onwards.

Company A Pty Ltd

Company A Pty Ltd (Company A) has a substituted accounting period (SAP) ending December. It was granted SAP status on a specific date in 20vv. Its first accounting period of SAP was the 20ww - xx income year (January 20ww - December 20ww). Its transitional period for 20ww was from July 20vv to December 20vv.

Company A purchased an airseeding seed cart. It was installed and ready for use in February 20yy.

Company A purchased an airseeding seeder bar (tool). It was installed and ready for use in March 20yy.

Company A obtained Research Participating Certificates in June 20yy for both of these pieces of equipment. The Certificates state that the taxpayer has 'successfully completed the Department of Agriculture's conservation tillage survey in June 20yy for the income year 20xx - yy.'

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 385-J

Clean Energy Legislation (Carbon Tax Repeal) Act 2014 Schedule 3

Reasons for decision

These reasons for decision accompany the Notice of private ruling for COMPANY A PTY LTD ("Company A").

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

The Offset was contained in Subdivision 385-J of the ITAA 1997 which provided a refundable tax offset for certain new depreciating assets used in conservational tillage farming practices. The Offset was intended to apply to the 2012 - 13 to 2014 - 15 income years. It was part of the then Government's Carbon Farming Futures program. The amount of the Offset was 15% of the cost of the depreciating asset.

Company A purchased an airseeding seed cart. This piece of equipment was installed and ready for use on February 20yy. Additionally, Company A purchased a airseeding seeder bar (tool). This piece of equipment was installed and ready for use in March 20yy.

Both of these dates fall within Company A's 20yy -zz income year, which due to their substituted accounting period ("SAP") runs from the period beginning of 20yy through to the end of 20yy.

Subdivision 385-J of the ITAA 1997 was repealed by Schedule 3 to the Clean Energy Legislation (Carbon Tax Repeal) Act 2014 (Cth) ("Repeal Act"), which commenced on 18 July 2014.

Prior to repeal, subsection 385-175(1) of the ITAA 1997 provided:

SECTION 385-175 Refundable tax offset for conservation tillage 

385-175(1) You are entitled to a *tax offset under this section (the conservation tillage offset) for an income year in respect of a *depreciating asset if:

(a) the asset is an *eligible no-till seeder; and

(b) the income year is:

(i) the 2012-13 income year; or

(ii) the 2013-14 income year; or

(iii) the 2014-15 income year; and

(c) at a particular time during the income year, you:

(i) start to use the asset to carry on a *primary production business (without previously having the asset *installed ready for use); or

(ii) have the asset installed ready for use to carry on a primary production business; and

(d) at the time mentioned in paragraph (c), you *hold the asset; and

(e) the time mentioned in paragraph (c) is not:

(i) before 1 July 2012; or

(ii) after 30 June 2015; and

(f) the *Agriculture Secretary has issued a Research Participation Certificate to you under section 385-190 for the income year; and

(g) you claim the offset in your *income tax return for the income year.

The Schedule 3 of the Repeal Act repealed the operation of subdivision 385-J of the ITAA 1997 from 18 July 2014 and relevantly states:

6 Application of amendments

The amendments made by this Schedule apply to assessments for the 2014-15 income year and later income years.

Note: The provisions of the Income Tax Assessment Act 1997 repealed by this Schedule will continue to apply to assessments for the 2012-13 and 2013-14 income years.

7 Transitional-timing relating to 2013-14 income year

The following provisions of the Income Tax Assessment Act 1997:

(a) subparagraph 385-175(1)(e)(ii);

(b) subparagraph 385-190(1)(c)(ii);

apply for the purposes of assessments for the 2013-14 income year as if those provisions referred to 30 June 2014 rather than 30 June 2015.

With item 6 of Schedule 3 to the Repeal Act repealing Subdivision 385-J for 'assessments for the 2014-15 income year and later income years', the Offset was not available for the 2014 -15 income year and onwards.

As the relevant equipment purchased by Company A was first installed ready for use in Company A's 20yy-zz income year, repeal of the Offset meant that Company A is unable to claim the Offset for that income year.

Addressing your contentions

The Repeal Act has retrospective operation as it commenced to repeal the Offset on 18 July 2014 for the 2014 -15 income year onwards.

You contended that the Acts Interpretation Act 1901 and Maxwell v Murphy (1957) 96 CLR 26 set out the principle that where amending legislation retrospectively repeals the operation of existing law and affects existing rights or obligations, there must be sufficient certainty as to the rights or the abrogation of rights under the existing legislation.

While there is a presumption against the retrospective application of legislation, this is subject to a contrary intention within that legislation.

The Repeal Act specifically extinguishes any further entitlement to the Offset for the 2014-15 income year onwards with no further condition that might suggest an intention for the repeal to operate differently in respect of SAP taxpayers. The Repeal Act introduced transitional amendments that relate solely to the 2013-14 income year. The transitional provisions modified the timing requirements in subparagraph 358-175(1)(e)(ii) of the ITAA 1997 such that the period in which the asset was used or installed ready for use was brought forward from 30 June 2015 to 30 June 2014. These transitional provisions do not apply to any other income year.

Therefore, the Commissioner is satisfied that the intention of the Repeal Act to apply retrospectively to all taxpayers is clear. Consequently, Company A is unable to claim the Conservation Tillage Offset ("Offset") in its income tax return for the period January 20yy to December 20yy (20yy -zz income year).