Energy Grants Credits Scheme: agriculture - packing and loading of chickens for transportation

Is the use of a forklift to unload empty modules from a vehicle, move the modules into a chicken shed, hold the modules at a particular angle to facilitate the placement of live chickens into the modules, move the full modules back to the vehicle, and place the modules back onto the vehicle, the packing of the produce of a core agricultural activity for the purposes of paragraph 27(g) of the Energy Grants Credits Scheme Act 2003 (EGCSA)?

No. The use of a forklift to unload empty modules from a vehicle, move the modules into a chicken shed, hold the modules at a particular angle to facilitate the placement of live chickens into the modules, move the full modules back to the vehicle, and place the modules back onto the vehicle is not the packing of the produce of a core agricultural activity for the purposes of paragraph 27(g) of the EGCSA.

The entity operates a transport business, transporting chickens from agricultural properties to a chicken processing plant.

The entity drives a vehicle to a poultry farm. This vehicle carries empty modules and a fork lift.

Once at the farm, the entity uses a forklift to remove empty modules from the vehicle and move the modules to the chicken sheds. Workers then pack the chickens into the open modules. The forklift rotates the modules to a certain angle to enable the live chickens to be packed with a minimum of damage or distress to the chickens. The forklift then transports the packed modules from the farm sheds to the vehicle and loads them onto the vehicle. This process of moving empty modules to the sheds, filling the modules and returning them to the vehicle is repeated until sufficient chickens have been loaded. The vehicle then transports the live chickens to a chicken processing plant.

The process of catching and packing the chickens into modules is done by hand. The forklifts are not switched off as a team of catchers can load a full module in one to two minutes depending on the size of the birds in the shed.

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 that qualifies, including 'primary production'. Section 21 of the EGCSA defines primary production as meaning agriculture, fishing operations or forestry.

'Agriculture' is defined in section 22 of the EGCSA as meaning a number of activities including, per paragraph 22(1)(i) of the EGCSA, a sundry agriculture activity.

The term 'sundry agricultural activity' is defined in section 27 of the EGCSA to mean a number of activities including, per paragraph 27(g), the packing, or the prevention of deterioration, of the produce of a core agricultural activity. However, paragraph 27(g) of the EGCSA provides that the packing of the produce of a core agricultural activity only qualifies as a sundry agricultural activity if: (i) the packing, or the prevention of deterioration, of the produce is carried out on an agricultural property where a core agricultural activity is carried on; and (ii) there is no physical change to the produce; and (iii) the packing, or the prevention of deterioration, of the produce does not constitute a processing of the produce.

Section 31 of the EGCSA defines a core agricultural activity as, • the cultivation of soil • the cultivation or gathering in of crops • the rearing of livestock, and • viticulture, horticulture, pasturage or apiculture,

provided the activity is carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale.

The term 'produce' is not defined in the EGCSA. The Macquarie Dictionary , 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'produce' as, '12. that which is produced; yield; product. 13. agricultural or natural products collectively.'

The term 'produce' appears frequently throughout the agriculture provisions in the EGCSA. One example of its use is in the 'business test' in section 22 of the EGCSA. Subsection 22(2) of the EGCSA specifically excludes from the definition of agriculture... (b) an activity...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. Given this test must be satisfied in order for any activity (other than hunting or trapping) to qualify as agriculture, the term 'produce' is clearly intended to be read broadly. Chickens reared on an agricultural property are clearly the 'produce' of that property.

The packing of the chickens occurs on a farm, does not result in a physical change to the chickens and does not constitute a processing of the chickens. Therefore the physical packing of the modules satisfies the requirements of paragraph 27(g) of the EGCSA. However, as the packing of the modules is done by hand, no diesel fuel is used for the packing itself. Diesel fuel is only used to power the forklift which moves the empty modules into position and removes the full modules. Therefore we must consider whether the work undertaken by the forklift is more properly described as 'packing' the produce, or merely transporting the produce.

In this case the forklift performs many functions. It removes the empty modules from the vehicle, it moves the modules to the shed, it holds the modules at a certain angle to allow for the packing of the chickens, it moves the full modules back to the vehicle and it loads the modules back onto the vehicle.

The unloading of the modules from the vehicle and the movement of the modules into the shed are considered to be part of the transportation of the chickens rather than the packing of the chickens. Similarly, the movement of the modules back to the vehicle and the loading of the modules onto the vehicle are more properly regarded as part of the transportation of the chickens.

The remaining use of the forklift is the positioning of the modules and the holding of the modules in position while the chickens are packed. Once again, this is considered to be part of the transportation of the chickens rather than the packing of the chickens.

This view is supported when the packing of chickens is compared with the packing of other types of produce such as apples. If an apple farmer has a mechanised plant that packs apples into boxes, and a forklift transports the filled boxes onto a vehicle and replaces them with empty boxes, we would not consider the positioning of the empty boxes (at the appropriate height for filling) to be part of the packing of the produce. It is the mechanised plant that undertakes the packing and not the forklift. The forklift, while it places the boxes (or modules) at a convenient angle and height, is predominantly concerned with the transportation of the produce to the waiting vehicle.

Whilst the process of placing the live chickens into modules is considered to be the packing of produce, no diesel fuel is used in this process. We consider the forklift is undertaking the transportation of produce, rather than the packing of produce. Therefore, the use of a forklift to unload empty modules from a vehicle, move the modules into a chicken shed, hold the modules at a particular angle to facilitate the placement of live chickens into the modules, move the full modules back to the vehicle, and place the modules back onto the vehicle is not the packing of the produce of a core agricultural activity for the purposes of paragraph 27(g) of the EGCSA