Diesel and Alternative Fuel Grants Scheme: primary production business activities

Is an entity entitled to a fuel grant under section 10AA of the Diesel and Alternative Fuel Grants Scheme Act 1999 (DAFGSA) when it delivers meat products (made from livestock the entity has raised) from its livestock processing factory to customers?

No. An entity is not entitled to a fuel grant under section 10AA of the DAFGSA when it delivers meat products (made from livestock the entity has raised) from its livestock processing factory to customers.

An entity operates an enterprise that undertakes production of meat products in a factory and the delivery of these products from the factory.

The enterprise also undertakes the rearing of livestock which are then transported to the factory for processing.

An entity's entitlement to a fuel grant where that entity carries on a primary production business, is discussed in section 10AA of the DAFGSA, which states; (1) If you carry on a primary production business, you are entitled to a fuel grant for the use of diesel fuel or alternative fuel in a vehicle that has a gross vehicle mass of 4.5 tonnes or more, but less than 20 tonnes, if: (a) the vehicle is a vehicle for transporting passengers or goods; and (b) you purchased the diesel fuel or alternative fuel, or imported it into Australia. (2) However, you are only entitled to the grant to the extent that you use the diesel fuel or alternative fuel, in carrying on your primary production business, in operating the vehicle on a public road in Australia.

Under the above definition, not only must the entity be carrying on a business of primary production, but (per subsection (2)) it must use the relevant fuel in carrying on its primary production business.

Section 5 of the DAFGSA defines the term 'primary production business' as having the same meaning as in the Income Tax Assessment Act 1997 . Section 995-1 of the Income Tax Assessment Act states;

you carry on a primary production business if you carry on a business of: (a) cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment; or (b) maintaining animals for the purpose of selling them or their bodily produce (including natural increase); ...

The rearing of livestock falls within the definition of a primary production business under paragraph (b) of the above definition. However, the processing of livestock to produce meat products, although carried out by the same entity that rears the livestock, is a business activity distinct from the entity's primary production activities. The processing of livestock is more properly regarded as a manufacturing business rather than being an extension of the entity's primary production business. The delivery of meat products to retail outlets is connected to the manufacturing business rather than the primary production business.

As stated above, subsection 10AA(2) of the DAFGSA provides that an entity will only be eligible for a fuel grant under that provision to the extent that the entity uses the diesel fuel or alternative fuel, in carrying on its primary production business. As the diesel fuel used in delivering meat products is not used in the entity's primary production business, no entitlement to a fuel grant exists under section 10AA of the DAFGSA.