Private ruling: Fuel tax credits - Agriculture - Aerial Spraying
Published: July 2011
Ruling period: 2010-11 income year | 2011-12 income year
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a fuel tax credit for the use of diesel fuel in your aircraft used to conduct aerial spraying to control pests and weeds and fertilise on agricultural properties? | A1: Yes.

Relevant facts and circumstances: You operate an aerial agricultural business utilising an aircraft with an engine that runs on diesel fuel. You are contracted by farmers to undertake weed and pest control activities. You only spray properties where agricultural activities are conducted. Other activities that you undertake include spreading of fertilisers for farmers, which is only a small percentage of your activities. You are registered for goods and services tax (GST).

Relevant legislative provisions: Fuel Tax Act 2006 section 41-5 | Fuel Tax (Consequential and Transitional Provisions) Act 2006 subitem 11(5) of Schedule 3 | Energy Grants (Credits) Scheme Act 2003 section 53 | Energy Grants (Credits) Scheme Act 2003 subsection 53(2) | Energy Grants (Credits) Scheme Act 2003 subsection 22(1) | Energy Grants (Credits) Scheme Act 2003 paragraph 22(1)(a) | Energy Grants (Credits) Scheme Act 2003 paragraph 22(1)(b) | Energy Grants (Credits) Scheme Act 2003 paragraph 22(1)(c) | Energy Grants (Credits) Scheme Act 2003 paragraph 22(1)(d) | Energy Grants (Credits) Scheme Act 2003 paragraph 22(1)(i) | Energy Grants (Credits) Scheme Act 2003 paragraph 27(h) | Energy Grants (Credits) Scheme Act 2003 section 31 | Energy Grants (Credits) Scheme Act 2003 subsection 28(1)

Reasons for decision: Summary: Section 41-5 of the Fuel Tax Act 2006 (FTA) provides that you are entitled to a fuel tax credit for taxable fuel that you acquire, to the extent that you do so for use in carrying on your enterprise, if you are registered for GST. However, Division 2 of Schedule 3 to the Fuel Tax (Consequential and Transitional Provisions) Act 2006 (FTCTPA) operates to restrict this entitlement to specific activities, whilst maintaining entitlements that existed under the previous Energy Grants (Credits) Scheme Act 2003 (EGCSA). Subitem 11(5) of the FTCTPA provides that you are entitled to a fuel tax credit if you would have been entitled to an off-road credit under the EGCSA. You acquire diesel fuel for use in your aircraft in carrying on your enterprise and you are registered for GST. Section 53 of the EGCSA provides that you are entitled to an off-road credit if you purchase off-road diesel fuel for a use by you that qualifies. Use in primary production (otherwise than for the purpose of propelling a road vehicle on a public road) is a use that qualifies. Primary production includes agriculture. Agriculture is defined in subsection 22(1) of the EGCSA as: (a) the cultivation of the soil; or (b) the cultivation or gathering in of crops; or (c) the rearing of live-stock; or (d) viticulture, horticulture, pasturage or apiculture; and includes: … (i) a sundry agricultural activity. | Detailed Reasoning - Spraying: Paragraph 27(h) of the EGCSA provides that a sundry agricultural activity includes weed, pest or disease control, provided it is: · undertaken by a person who carries on a core agricultural activity or by a person contracted by that person; and · it occurs on the agricultural property where the core agricultural activity is carried on. Therefore, to be entitled to an off-road credit, you must satisfy these requirements. Each will be considered in turn. | Detailed Reasoning - Weed, pest or disease control: You spray agricultural properties. The spraying is undertaken to prevent weeds and pests. Therefore, you satisfy this requirement. | Detailed Reasoning - On the agricultural property where the core agricultural activity is carried on: A core agricultural activity is defined in section 31 of the EGCSA as an activity referred to in paragraphs 22(1)(a) to (d) of the EGCSA, 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 farmers you spray for undertake core agricultural activities on their properties. | Detailed Reasoning - It is on these properties that you use your aircraft to spray for weeds and pests.: As these activities are weed and pest control and since you undertake them on the agricultural property where the core agricultural activity is carried on, you satisfy this requirement. | Detailed Reasoning - Contracted by a person who carries on a core agricultural activity: You are directly contracted by farmers when you undertake spraying for weeds and pests on their agricultural properties. Therefore, you are contracted by a person who carries on a core agricultural activity. Accordingly, you satisfy this requirement. Since you satisfy all the requirements of paragraph 27(h) of the EGCSA, you are undertaking a sundry agricultural activity and therefore, agriculture under section 22 of the EGCSA. As such, you are entitled to an off-road credit under subsection 53(2) of the EGCSA for the use of diesel fuel in your aircraft whilst undertaking the spraying of weeds and pests on agricultural properties. | Detailed Reasoning - Fertilising: The expression 'cultivation of crops' does not have any particular trade or technical meaning and is not defined in the EGCSA. It therefore takes its ordinary meaning. In the context of paragraph 22(1)(b) of the EGCSA, the relevant meaning of the term 'cultivate' is 'raise or produce crops.' The expression 'cultivation of crops' in paragraph 22(1)(b) of the EGCSA means all the activities necessary for the survival and nurturing of crops, including: · · sowing of seeds or planting; and · · fertilising. A contractor is entitled to an off-road credit if they purchase diesel fuel for use in carrying out an agricultural activity as defined in subsection 28(1) of the EGCSA, provided that the activity is for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale. As you are carrying on the cultivation or gathering in of crops (i.e. fertilising), which is an agricultural activity as defined in subsection 28(1) of the EGCSA, and you are contracted to perform these activities to benefit primary production businesses (i.e. the farmers) undertaken to obtain produce for sale, you satisfy this condition. You are therefore undertaking agriculture and are entitled to an off-road credit for the use of diesel fuel in your aircraft under subsection 53(2) of the EGCSA whilst fertilising on agricultural properties. | Detailed Reasoning - Travel: The flight to and from the agricultural property where the activities occur is an essential and necessary part of the operation, and as a consequence there are no points at which the activity could be considered to commence or finish. Hence, there is an entitlement from take off to landing during these operations. Accordingly, as you are entitled to an off-road credit, you are entitled to a fuel tax credit for the use of diesel fuel in your aircraft used to conduct aerial spraying to control pests and weeds and fertilise on agricultural properties.