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Is the production of mushroom substrate, by a commercial mushroom grower, wholly for their own use, 'horticulture' as defined in subsection 164(7) of the Customs Act 1901 for the purposes of the diesel fuel rebate scheme?

Yes. The production of mushroom substrate, by a commercial mushroom grower wholly for their own use, is 'horticulture' as defined in subsection 164(7) of the Customs Act for the purposes of the diesel fuel rebate scheme.

The client is a commercial mushroom grower who produces mushroom substrate and then uses the substrate as a growth medium for mushrooms in their business.

All the substrate produced is used in the business and is not made available for commercial sale.

Paragraph 78A(1)(aa) of the Excise Act 1901 and corresponding paragraph 164(1)(aa) of the Customs Act provide that a rebate is payable to a person who purchases diesel fuel for use by them in primary production (otherwise than for the purpose of propelling a road vehicle on a public road). 'Primary production' includes, among other things, agriculture.

Subsection 164(7) of the Customs Act defines 'agriculture' as meaning: (d) viticulture, horticulture, pasturage or apiculture; ... but does not include: ... (zd) an activity referred to in any one of paragraphs (a) to (za) or paragraph (zba) 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.

Subsection 164(7) of the Customs Act provides that 'horticulture' includes: (a) the cultivation or gathering in of fruit, vegetables, herbs, edible fungi, nuts, flowers, trees, shrubs or plants; ...

As horticulture is defined inclusively in the legislation, an activity can be considered 'horticulture' if it is within any of the activities specified in the definition of horticulture and is carried out for the purpose of, or will directly benefit a business undertaken to obtain produce for sale.

In Australian Native Landscapes Pty Ltd v. Collector of Customs (1997) 24 AAR 353; (1997) 44 ALD 531 ( Australian Native Landscape Case ) the Federal Court held that commercial manufacture of potting mix was not 'horticulture' and confirmed the distinction made by the Administrative Appeals Tribunal (AAT) between this commercial production and the production of potting mix by a grower for his or her own purposes, which may be regarded as horticulture.

Later, in Elf Farm Supplies Pty Ltd v. CEO of Customs [1998] AATA 929; (1998) 28 AAR 485 ( Elf Farm's Case ) the AAT applied the distinction made in the Australian Native Landscape Case , to determine that the commercial production of mushroom substrate used in the cultivation of edible fungi was not 'horticulture'.

The production of mushroom substrate by a commercial mushroom grower is not the specific set of facts considered by the AAT in Elf Farm's Case - rather it is analogous to the production of potting mix by a commercial grower for his or her own purposes, which the Federal Court was inclined to regard as 'horticulture' in Australian Native Landscape Case .

Accordingly the production of mushroom substrate by a commercial mushroom grower used for his or her own purpose of growing mushrooms for sale is 'horticulture' and the client is eligible for rebate.