ATO Interpretative Decision

ATO ID 2004/64

Excise

Energy Grants (Credits) Scheme: off-road - agriculture - drilling wells for water
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is drilling wells for ground water on an agricultural property an 'agricultural soil/water activity' as defined in section 24 of the Energy Grants Credits Scheme Act 2003 (EGCSA)?

Decision

Yes. Drilling wells for ground water on an agricultural property is an 'agricultural soil/water activity' as defined in section 24 of the EGCSA.

Facts

The entity operates a business drilling wells for ground water.

The entity is contracted by an agricultural property owner to drill wells for water. The drilling for water takes place on an agricultural property where a core agricultural activity is carried on, and the ground water is only for use in an agricultural activity.

Drilling activities involve test drilling. If the test drilling at one site is not successful the drill rig moves to another site to undertake further test drilling. A bore is established when suitable water is found.

Reasons for Decision

Under the Energy Grants Credits Scheme an entity is, subject to certain conditions, entitled to an energy grant if they purchase diesel fuel for use by them in one of the defined activities, including 'agriculture'.

'Agriculture' is defined in section 22 of the EGCSA and includes an 'agricultural soil/water activity'.

The definition of an 'agricultural soil/water activity' in section 24 of the EGCSA includes:

(b)
searching for ground water solely for use in an agricultural activity, or the construction or maintenance of facilities for the extraction of such water, solely for that use, if the searching, construction or maintenance:

(i)
is carried out on an agricultural property where a core agricultural activity is carried on, or at a place adjacent to that property; and

(ii)
is carried out by the person who carries on the first-mentioned agricultural activity or by a person contracted by that person to carry out the searching, construction or maintenance...

The entity's drilling activities are carried out on an agricultural property where a core agricultural activity is carried on, and are carried out by a person who is contracted to the person carrying out the agricultural activity the water is for use in.

Therefore, the entity's activities will be an agricultural soil/water activity if they constitute:

(i): the searching for ground water solely for use in an agricultural activity, and/or
(ii): the construction or maintenance of facilities for the extraction of such water.

The Macquarie Dictionary 2001 rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'search' as 'to go or look through carefully in seeking to find something', and 'the act of searching; careful examination or investigation.' The test drilling and movement of the drilling rig to different places on the agricultural property to drill for ground water until it is found, amount to 'searching' for ground water, as it is through such examination and investigation that the ground water being searched for is found.

Accordingly, drilling wells for water on an agricultural property is an 'agricultural soil/water activity' as defined in section 24 of the EGCSA.

Date of decision: 5 January 2004

Legislative References:
Energy Grants (Credits) Scheme Act 2003
section 22
section 24

Related ATO Interpretative Decisions
ATO ID 2004/63

Other References:
The Macquarie Dictionary 2001 rev. 3rd edn, The Macquarie Library Pty Ltd, NSW

Keywords
EGCS agriculture
EGCS off-road
EGCS searching for ground water as an agricultural soil/water activity

Business Line: Indirect Tax

Date of publication: 23 January 2004

ISSN: 1445-2782

history

	Date:	Version:
You are here	5 January 2004	Original statement
	1 July 2012	Archived

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