Issue
Is the retrieval of scrap metal from agricultural properties, an 'agricultural waste activity' as defined in section 26 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?
Decision
Yes. The retrieval of scrap metal from agricultural properties is an 'agricultural waste activity' as defined in section 26 of the EGCSA.
Facts
An entity collects scrap metal from various agricultural properties where the agricultural activity of rearing livestock is carried on. The scrap metal consists of items such as damaged and discarded farm equipment which was once used on the agricultural property.
The entity uses diesel-powered truck cranes and excavators equipped with a grapple, shear or a magnet to load the scrap metal onto trucks for removal from the agricultural properties. The entity then transports the scrap metal to a depot where it is sorted and then sent for export and recycling.
Reasons for Decision
Section 53 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, including 'agriculture'.
'Agriculture' is defined in section 22 of the EGCSA to include an 'agricultural waste activity', which is defined in turn in section 26 of the EGCSA.
Section 26 of the EGCSA states:
The expression 'agricultural waste activity' means: (a) the removal of waste products of an agricultural activity from the agricultural property where the activity is carried on; or (b) the disposal of waste products of an agricultural activity on the agricultural property where the activity is carried on.
As the products are not being disposed of on the agricultural property, paragraph 26(a) of the EGCSA is the most pertinent part of this definition. In order to fall within this paragraph, the scrap metal must first constitute 'waste products of an agricultural activity.'
In Water Administration Ministerial Corporation v. CEO of Customs No.N96/1212 AAT No. 1211, the Administrative Appeals Tribunal (AAT) stated that a waste product can be described as something that is an excess material, or is unproductive and superfluous. It also described waste product as material produced in a process, as manufacture, and discarded as useless when the process is completed.
The AAT went on to say that the concept of waste embraces all economically unusable or rejected by-products at any given place and time, and any other matter which may be discharged, accidentally or otherwise into the environment.
Scrap metal on a farm is clearly waste. The remaining issue is whether it is the product of an agricultural activity.
The term 'agricultural activity' is defined in section 28 of the EGCSA as meaning: An activity referred to in any one of the paragraphs of the definition of agriculture in subsection 22(1) (other than an activity referred to in paragraph (i) or (j) of the definition of sundry agricultural activity in section 27) if that activity is carried out for the purposes of, or purposes that will directly benefit, a business undertaken to obtain produce for sale.
The definition of 'agriculture' in subsection 22(1) of the EGCSA includes, among other things, the activities of 'cultivation of the soil', 'cultivation or gathering in of crops', 'rearing of livestock', 'viticulture', 'horticulture', 'pasturage' or 'apiculture'.
The term 'product' is not defined in the EGCSA and therefore takes on its ordinary meaning. The Macquarie Dictionary 2001, rev, 3rd edn, The Macquarie Library Pty Ltd NSW defines the term 'product' as meaning: 1. a thing produced by any action or operation, or by labour; an effect or result.
Clearly a piece of agricultural machinery such as a tractor is not produced by an agricultural activity. However, we accept that where machinery loses its economic usefulness as a result of its use in agricultural activities, the resultant scrap metal is in effect a 'product' of the agricultural activity.
As the scrap metal is the 'product' of an agricultural activity and is being removed from the property where the agricultural activity is carried on, the entity is conducting an 'agricultural waste activity' as defined in paragraph 26(a) of the EGCSA.