Private ruling: Forestry activities
Published: March 2014

Ruling: Q1: Are the activities of screening and re-chipping 'forestry' activities pursuant to section 43-75 of the Fuel Tax Act 2006 (FT Act)? | A1: The activity of re-chipping is a 'forestry' activity pursuant to section 43-75 of the FT Act. The activity of screening is not a 'forestry' activity pursuant to section 43-75 of the FT Act. | Q2: If yes to question 1, is the forestry road portion of the trip from A to B a 'forestry' activity pursuant to section 43-75 of the FT Act? | A2: The transportation of the material from A to B is for both 'forestry' and 'non-forestry' activities. Therefore, as explained in paragraph 5 of Fuel Tax Determination FTD 2010/1 Fuel tax: is apportionment used when determining total fuel tax credits in calculating the net fuel amount under section 60-5 of the Fuel Tax Act 2006 ?, you are required to apportion the fuel used in the transportation of the material between these activities when calculating your entitlement to fuel tax credits.

Relevant facts and circumstances: You are registered for GST. The raw material used to produce your product includes sawmill residue (woodchips). Part of the trip from A to B is on forestry roads. The following details the process under which the woodchips are transported and re-chipped: • The raw timber is logged and debarked at the plantation where some of the raw timber is excess offcuts that are subsequently chipped. • You purchase the woodchips, which are not screened or pre-sorted into sizes. They are all in one pile. • The woodchips are then transported from A to B. Part of the journey is on a forestry road. • When the woodchips arrive at B, they are added to your stockpile of woodchips. • The woodchips undergo a screening process to ensure that they meet your size specifications. They are sorted into the following groups; n 'Overs' refers to woodchips which are larger than the required specification and are subsequently re-chipped and resized. Some of the chips are 'overs'. These go through the re-chipper and then through the screening process again. n 'Chips' refers to woodchips which are ready to enter the final stage of manufacture. n 'Other' refers to woodchips that are not suitable for re-chipping or for the final stage of manufacture. • Once the woodchips have been screened and the 'overs' re-chipped to meet your specific size requirements, they are ready to enter the final stage of manufacture.

Relevant legislative provisions: Fuel Tax Act 2006

Reasons for decision: Summary: In this ruling all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website www.ato.gov.au Question 1 Are the activities of screening and re-chipping 'forestry' activities pursuant to section 43-75 of the Fuel Tax Act 2006 (FT Act)? The expression 'forestry' is defined in section 43-75 of the FT Act to mean: a) the planting or tending, in a forest or plantation, of trees intended for felling; or b) the thinning or felling, in a forest or plantation, of standing timber; and includes c) the transporting, milling or processing, in a forest or plantation, of timber felled in the forest or plantation; and d) the milling of timber at a sawmill or chip mill that is not situated in the forest or plantation in which the timber was felled; and e) if timber is milled at a sawmill or chip mill that is not situated in the forest or plantation in which the timber was felled - the transporting of the timber from the forest or plantation in which it was felled to the sawmill or chip mill; and f) the making and maintaining in a forest or plantation referred to in paragraph (a) or (b) of a road that is integral to the activities referred to in paragraph (a), (b) or (c). Is the wood product timber? The meaning of the word timber was considered by the Administrative Appeals Tribunal (AAT) in Re T J Depiazzi and Sons and Collector of Customs NSW No. W92/114 AAT No. 8770 (1993) 17 AAR 557 (Depiazzi). 24. As the Tribunal sees the matter, any element of the material that originally was a constituent of a tree that has been felled is capable of fitting the notion of "timber" within paragraph (d) throughout the course of events when it is subject to a process of further reduction in size and shape up to the point where the basic constituent material, in reduced or separated form, is subjected to a secondary process or treatment… As stated in paragraph 162 of Fuel Tax Ruling FTR 2012/2 Fuel tax: fuel tax credits for taxable fuel acquired or manufactured in, or imported into, Australia for use in carrying on an enterprise involving 'forestry' as defined in section 43-75 of the Fuel Tax Act 2006 ( FTR 2012/2), 'milling of timber' is undertaken by subjecting timber to the operation of a rotary mill for the purpose of reducing the timber in size and shape. In ATO Interpretative Decision ATO ID 2004/763 (Withdrawn) Excise Energy Grants (Credits) Scheme: off-road - forestry - processing of timber , which related to the former Energy Grants (Credits) Scheme, the screening of woodchips was found not to constitute forestry activities as the woodchips are already in a state where they are ready to undergo secondary processing. Although the ID has been withdrawn (superseded by PGBR 2005/1), the principles in the ID remain valid. Specifically the ATO ID states: In this instance the timber has already been milled to produce woodchips and will undergo no further reduction in size and shape. The woodchips are being transported so that they can be screened to clean and sort the chips into products suitable for use in an industrial process. The mere screening of material does not constitute a forestry activity; the material must undergo further reduction in size. The screening of the woodchips is a secondary process that prepares them for use in secondary activities. Accordingly, the screening of the woodchips is not a forestry activity. The bulk of the material transported will not be subjected to a process of further reduction in size and shape, as it is already at the point where it will be subjected to a secondary process or treatment. However, some of the material transported (the 'overs'), is to be subjected to a process of further reduction in size and shape up to the point where the material, in its reduced or separated form, will be subjected to a secondary process or treatment. Accordingly, the 'overs' are considered to be timber and the re-chipping of this timber is a forestry activity. Question 2 If yes to question 1, is the 'forestry road' portion of the trip from A to B a 'forestry' activity pursuant to section 43-75 of the FT Act? Under section 43-75 of the FT Act, the definition of 'forestry' includes: (c) the transporting, milling or processing, in a forest or plantation, of timber felled in the forest or plantation; and (e) if timber is milled at a sawmill or chip mill that is not situated in the forest or plantation in which the timber was felled - the transporting of the timber from the forest or plantation in which it was felled to the sawmill or chip mill. The term 'forestry road' is not defined in the FT Act. However, paragraph 221 of FTR 2012/2 explains that 'forestry roads' are roads within forests or plantations, which are constructed primarily and principally for the purposes of providing access to an area to enable trees to be planted or tended in the area, or timber felled in the area to be removed. On the basis of the presented facts, the 'forestry road' portion is xx% of the road from A to B. In answering question 1, we determined that the 'overs' being transported are timber. Accordingly, in transporting the 'overs' from A to B, the 'forestry road' portion of the trip is a 'forestry' activity pursuant to paragraph 43-75(e) of the FT Act. In answering question 1, we also determined that the rest of the material being transported is not timber. Accordingly, in transporting these from A to B, the 'forestry road' portion of the trip is not a 'forestry' activity pursuant to paragraph 43-75(e) of the FT Act. The transportation of the material from A to B is both a 'forestry' activity and a 'non-forestry' activity. Therefore, as explained in paragraph 5 of FTD 2010/1, you are required to apportion the fuel used in the transportation of the material between that used in the 'forestry' activity and that used in the 'non-forestry' activity when calculating your fuel tax credit entitlement.