Issue
Is the pumping of water by a statutory authority an 'agricultural soil/water activity' as defined in section 24 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?
Decision
No. The pumping of water by a statutory authority is not an 'agricultural soil/water activity' as defined in section 24 of the EGCSA.
Facts
A statutory authority is responsible for the supply of irrigation water predominantly to primary producers.
The authority was constituted by ministerial order under the provisions of an Act of the Parliament of a State of Australia and derives its powers from that Act. The powers and functions conferred on the authority under that Act include provision, management, operation and protection of water supply systems, including the collection, storage, treatment, transfer and distribution of water.
The Statutory Authority use off-road diesel fuel to pump water out of storage for irrigation purposes.
Reasons for Decision
Section 53 of the EGCSA provides that, subject to the conditions and restrictions specified in the regulations to that Act, a person 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 soil/water activity'.
Section 24 of the EGCSA then specifies a number of different activities that constitute agricultural soil/water activities.
The most pertinent activity in section 24 of the EGCSA is set out in paragraph (d), which states that the pumping of water solely for use in an agricultural activity is an agricultural soil/water activity provided the following tests are satisfied: • the pumping must be carried out on an agricultural property where a core agricultural activity is carried on, or at a place adjacent to that property; and • the pumping must be carried out by the person who carries on the agricultural activity the water is for use in; or by a person contracted by that person to carry out the pumping, other than a person so contracted that is a Commonwealth authority or a State or Territory authority.
The second test will be examined first of all.
Is the pumping carried out by the person who carries on the agricultural activity the water is for use in, or by a person contracted by that person to carry out the pumping, other than a person so contracted that is a Commonwealth authority or State or Territory authority?
The term 'agricultural activity' is defined in section 28 of the EGCSA to mean: 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.
In this instance, the statutory authority carrying out the pumping of water is responsible only for the supply of irrigation water, and does not carry out any agricultural activity the water may be used in.
Consequently, the entity will only be carrying out an agricultural soil/water activity if they are contracted to a person who uses the water in an agricultural activity and they are not a Commonwealth authority or State or Territory authority.
The term 'State or Territory authority' is defined in section 4 of the EGCSA as: (a) an instrumentality of a State or Territory; or (b) an authority or body established for the purpose of a State or Territory by or under a law of the State or Territory.
A statutory authority which was constituted by ministerial order under an Act of a State Parliament for the purpose of providing, managing, operating and protecting water supply systems in that State is a State authority for the purposes of the EGCSA.
As the statutory authority is a 'State ... authority' for the purposes of the EGCSA, its activities are specifically excluded from paragraph 24(d) of the EGCSA, regardless of whether the other requirements of the paragraph are satisfied.
Consequently, the second of the above tests is not satisfied, and it is not necessary to consider the first test. The pumping activities of the statutory authority are not an 'agricultural soil/water activity' as defined in section 24 of the EGCSA.