Issue
Is the keeping of cattle owned by pastoral companies in a feedlot, where they are kept for research and commercial reasons, 'agriculture' as defined in section 22 of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?
Decision
Yes. The keeping of cattle owned by pastoral companies in a feedlot, where they are kept for research and commercial reasons, is 'agriculture' as defined in section 22 of the EGCSA.
Facts
An entity runs a feedlot for livestock.
The entity collects research data and provides standard commercial feedlot services.
The feedlot essentially operates as any normal feedlot, except that equipment has been set up to monitor the feed consumed by selected cattle.
The research activities generally relate to the care and controlled feeding of cattle in accordance with accepted animal management practices, and additional research is carried out on meat samples taken from selected cattle after slaughter.
The cattle that are cared for by the organisation are owned by various pastoral companies, who have reared them for the production of food. The ownership of the cattle remains with the pastoral companies. The entity charges the pastoral companies commercial rates for the agistment, feeding and other costs associated with the operation of the feedlot.
Some cattle are slaughtered and sold once they have achieved the required weight gain, and the proceeds of the sale are paid to the particular pastoral company that owned the cattle. Some are returned to the pastoral company which owns them for further rearing.
The pastoral companies are businesses undertaken to obtain produce for sale as required by the EGCSA.
Reasons for Decision
Subsection 53(1) 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. According to subsection 53(2) of the EGCSA agriculture is a use that qualifies.
Subsection 22(1) of the EGCSA states, in part, that 'agriculture' means: ... (c) the rearing of livestock; or ...
Subsection 22(2) of the EGCSA provides a further test: (2) The expression agriculture does not include: (a) fishing operations or forestry; or (b) an activity referred to in subsection (1) (other than hunting or trapping that is carried on for the purposes of a business, including the storage of any carcasses or skins obtained from the hunting or trapping) 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 the wording of subsections 22(1) and 22(2) of the EGCSA, the entity's activities will fall within the definition of 'agriculture' if they can be considered to be: • the 'rearing of livestock', and • carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale.
Each test will be considered in turn.
Are the activities the 'rearing of livestock'?
The term 'rearing' is not defined in the EGCSA, and therefore its ordinary meaning must be considered. 'Rear' is defined in the Australian Oxford Dictionary 1999, Oxford University Press, Melbourne, as to: breed and care for animals
The rearing of livestock includes all activities required to breed, raise and care for the animals for the purpose for which they are being reared, in accordance with accepted commercial animal husbandry and management practices.
The entity in this case is 'rearing' the cattle, as it is caring for them and feeding them in accordance with accepted animal management practices, until they have achieved the required weight gain, so they can be slaughtered and sold.
The term 'livestock' is defined in section 4 of the EGCSA as having a meaning 'affected by subsection 23(2).'
Subsection 23(2) of the EGCSA defines live-stock in the following terms: The expression live-stock includes any animal reared for the production of food, fibres, skins, fur or feathers, or for its use in the farming of land.
Subsection 23(2) of the EGCSA affects the meaning of live-stock in two ways. Firstly, it clarifies that the term includes 'any animal'. This accords with the ordinary meaning of the term 'live-stock', as per the Australian Oxford Dictionary 1999, Oxford University Press, Melbourne, which defines the term 'live-stock' as: animals, esp. on a farm, regarded as an asset...
Secondly, subsection 23(2) of the EGCSA limits the definition by requiring that the animal be reared for the production of food, fibres, skins, fur or feathers, or for its use in the farming of the land.
In the context of the definition of 'live-stock' in subsection 23(2) of the EGCSA, the term 'includes' clarifies but does not expand the meaning of live-stock. It clarifies that only those animals that are reared for the production of food, fibres, skins, fur or feathers, or for their use in the farming of land, qualify as live-stock for the purposes of the off-road credits scheme.
As the cattle in the feedlot, regardless of whether they are being reared in part for research purposes, are being reared for the production of food, the cattle are 'livestock' for the purposes of subsection 23(2) of the EGCSA.
Accordingly, the entity's activities constitute the 'rearing of livestock'.
Are the activities carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale?
In this case, the entity conducts its rearing of livestock activities for a number of reasons, including obtaining data that will allow it to undertake research. However, subsection 22(2) of the EGCSA does not require an activity to be carried out solely for the purposes of or for purposes that will directly benefit a business undertaken to obtain produce for sale.
An entity may carry out an activity for a number of purposes and still satisfy the requirements of subsection 22(2) of the EGCSA provided that it can still be said that the activity is carried out for the purpose of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale.
An activity will directly benefit a business undertaken to obtain produce for sale if there is a close and immediate benefit (that is, a positive effect) to the business arising from the activity in question.
Ultimately, the animals that are being reared at the feedlot are owned by businesses undertaken to obtain produce for sale. These businesses obtain a close and immediate benefit from the entity's activities. The benefit would usually be in the form of the sale value of an animal that has been held at the feedlot, but in certain circumstances it may also include the return of an animal in good condition.
Consequently the rearing of livestock at the feedlot is carried out for the purposes of, or purposes that will directly benefit a business, or businesses, undertaken to obtain produce for sale.
Accordingly, the keeping of cattle owned by pastoral companies in a feedlot, where they are kept for research and commercial reasons, is 'agriculture' as defined in section 22 of the EGCSA.