Issue
Do firebreak maintenance and wildfire control activities carried out in a national park on behalf of a government authority constitute 'forestry' as defined in subsection 164(7) of the Customs Act 1901 for the purposes of the diesel fuel rebate scheme (off-road scheme)?
Decision
No. Firebreak maintenance and wildfire control activities carried out in a national park on behalf of a government authority do not constitute 'forestry' as defined in subsection 164(7) of the Customs Act for the purposes of the off-road scheme.
Facts
The taxpayer is contracted by a government authority to undertake regular firebreak maintenance and wildfire control activities.
The wildfire control activities involve constructing and maintaining control lines in the direct path of wildfires and away from the fire edge, and the movement of fire fighting machinery.
The work is carried out off-road in National Parks.
Reasons for Decision
Subsection 164(1) of the Customs Act and subsection 78A(1) of the Excise Act 1901 provide that a rebate is payable to a person who purchases diesel fuel for use 'in' specified off-road activities, including use of the fuel 'in' primary production (otherwise than for the purpose of propelling a road vehicle on a public road).
The term 'primary production' is defined for the purposes of both Acts in subsection 164(7) of the Customs Act to mean: (a) agriculture; or (b) fishing operations; or (c) forestry.
Unlike the definitions of agriculture and fishing operations in subsection 164(7) of the Customs Act, the definition of forestry has no specific requirement that the activities outlined in the section be carried on for the purposes of a business.
Despite this, it is considered that eligibility for diesel fuel rebate is only available for primary production activities (including forestry) that are conducted as a commercial or business enterprise.
This view is supported by the Explanatory Memorandum to the Diesel Fuel Taxes Legislation Amendment Act (No 1) 1982. The explanatory memorandum states that the package was designed to 'introduce ... a new system providing for rebates of duty paid on diesel fuel used for "off-road" purposes by persons engaged in the agriculture, mining, forestry and fishing industries'. The measures were intended to encourage the primary industries to which they applied. 'Primary industry' is defined as 'any industry such as dairy farming, forestry, mining etc., which is involved in the growing, producing, extracting, etc., of natural resources.' The activities must lead to a saleable product.
The references to 'industries' in the explanatory memorandum confirm a legislative intent to confine eligibility for the diesel fuel rebate to persons engaged in primary production as a commercial or business enterprise.
The view is also supported by comments made by the AAT in Re City of Nunawading and Comptroller-General of Customs No. V93/540 AAT No. 9758; (1994) 36 ALD 628. Although, in that case, the AAT was dealing with the meaning of agriculture and horticulture in subsection 164(7) of the Customs Act, prior to the 1995 amendments to that Act, in relation to the definition of forestry, it observed that: Where trees are intended for felling then presumably there is both a commercial aspect and a 'product' or 'crop'. We are not so clear that this is always the case when thinning of felling occurs in a forest or plantation of standing timber. Presumably, thinning or felling of that type may occur on occasion for conservation and environmental purposes rather than for the purpose of retrieval of the timber for itself.
In relation to horticulture, the AAT, after examining the context in which the word was used, and its ordinary and statutory meaning concluded: Looking at the context, we consider that the word 'horticulture', when used in section 164, is not limited to those activities specified in paragraphs (a), (b) and (c) of the definition but that to come within the meaning of horticulture in the Act, an activity must relate in some way to an aspect of primary production conducted as a commercial or business enterprise.
Having regard to forestry being an aspect of primary production, a similar approach is appropriate to the forestry activities that are within the meaning of forestry in subsection 164(7) of the Customs Act. Those activities must be carried out as part of a commercial or business enterprise involving primary production.
Activities which are carried on in national parks may be similar or identical to some of the activities carried on in the primary industry of forestry. However, when carried on in national parks, such activities are not undertaken in the course of a primary production business or enterprise and do not result in the sale of a crop or product. Instead, when carried out in national parks, the activities are generally undertaken for the purpose of environmental preservation or conservation.
Therefore, the firebreak maintenance and wildfire control activities carried out in a national park on behalf of a government authority do not constitute 'forestry' as defined in subsection 164(7) of the Customs Act for the purposes of the off-road scheme.