House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 1 - Interpretation

Outline of chapter

1.1 This chapter explains Part 2 of the Energy Grants (Credits) Scheme Bill 2003 that provides definitions for terms used generally in the bill, used only in relation to on-road credits, and used only in relation to off-road credits.

Detailed explanation of new law

Division 1 - List of definitions

1.2 Important terms used in the bill are listed and in some cases defined in Division 1. Terms that have application to the scheme in general are defined in clause 4 of the bill, while those listed but which are only applicable to either on-road or off-road credits are defined in Divisions 2 and 3 respectively (see Table 1.1).

1.3 A number of terms (listed in Table 1.2) have simply been transferred from the existing DAFGS and DFRS legislation (with minor modifications to allow for their operation in a scheme consisting of both on-road and off-road credits). Other terms have been expanded and new terms have been added to provide more clarity for claimants than was the case in the previous schemes.

1.4 Table 1.1 contains the terms listed in clause 4 that are defined in divisions other than Division 1.

1.5 Table 1.2 contains the terms that have been transferred with little or no change from the DAFGS and DFRS legislation.

1.6 The definition of gross vehicle mass has been altered from that which appears in the existing DAFGS legislation to account for the fact that there are situations where the gross vehicle mass of a vehicle, or gross combination mass of a prime mover, has not been specified by the manufacturer, or where the vehicle has been modified to the extent that the manufacturer's specifications are no longer appropriate. In these situations, the vehicle registration authority determines an appropriate gross vehicle mass or gross combination mass as the case may be. The existing DAFGS definitions do not allow for this possibility and merely rely on the manufacturer's specification.

1.7 The definition now comes in 2 parts, depending on whether the vehicle is registered for use on a public road or not. If it is registered, the gross vehicle mass (or gross combination mass for a prime mover) is that accepted by the authority that registered the vehicle, whether this is a State authority or the vehicle is registered under the Federal Interstate Registration Scheme. If it is not registered, the gross vehicle mass (or gross combination mass for a prime mover) is the road weight specified by the manufacturer as the maximum design weight of the vehicle, or in the absence of such a specification, the sum of the weight of the vehicle and the weight of the maximum load for which the vehicle is designed (including the weight of the driver and a full tank of fuel). [Clause 4]

1.8 Registered vehicle is defined to mean a vehicle registered for use on public roads. [Clause 4]

1.9 Road vehicle is defined to mean a vehicle of a kind ordinarily used on roads for transporting goods or passengers. [Clause 4]

Division 2 - Definitions used only for on-road credits

1.10 The metropolitan areas specified for the on-road credit are the same as those that apply for the DAFGS. Journeys undertaken by vehicles between 4.5 and 20 tonnes wholly within these areas will not qualify for the credit, unless undertaken by a primary producer, by a person carrying goods or passengers solely on behalf of a primary producer, by a bus using alternative fuel, or by an emergency vehicle. The actual area covered by each of the metropolitan areas will be detailed in the regulations to be prescribed. [Clause 6]

1.11 The definition of primary production business from the Diesel and Alternative Fuels Grants Scheme Act 1999 will apply for the on-road credit - it will be taken to have the same meaning as in the ITAA 1997. [Clause 7]

1.12 The Commissioner's powers under the Diesel and Alternative Fuels Grants Scheme Act 1999 to make a determination in writing as to the kinds of operations a vehicle undertakes between 2 points will be taken to be an eligible journey, and those that are not taken to be an eligible journey, has been retained for the on-road credit. A determination under this section will generally relate to the operations of vehicles of 4.5 tonnes or more, but less than 20 tonnes, that cross the metropolitan boundaries. [Clause 9]

1.13 The new term incidental use in relation to a vehicle has been introduced to extend entitlements to cover the incidental use of fuel in a vehicle. Incidental use covers certain circumstances where fuel is used in powering the vehicle, or auxiliary equipment in or on the vehicle, while the vehicle is stationary, or in moving the vehicle to or from a place where passengers or goods are loaded or unloaded. It also covers the use of the vehicle to train vehicle operators. [Clause 8]

Division 3 - Definitions used only for off-road credits

Subdivision B - Mining

1.14 For the off-road credit, mining operations means certain activities ranging from the exploration and prospecting for minerals to the recovery of minerals, including activities that fall within the definitions of the new terms listed in 1.15. [Clause 11]

1.15 The activities that fall within the definition of mining operations for the off-road credit are essentially the same (except for minor changes) as those activities that were eligible for a diesel fuel rebate for mining operations under the Customs Act 1901. The changes involve the deletion of references to transportation by sea and the deletion of the definitions of 'northern mining operations' and 'ship' (which are definitions for the purposes of transportation by sea) as this activity now qualifies under the definition of 'use in marine transport'. [Clause 11]

1.16 The mining operations definition has been drafted so as to provide greater certainty and clarity in comparison with the DFRS definition, by introducing the terms 'mining transport activity', 'mining rehabilitation activity', 'mining water activity', 'mining construction activity', 'mining waste activity', 'mining vehicle activity' and 'sundry mining activity'.

1.17 These terms are essentially headings for groupings of similar eligible activities from the definition of mining activities in the Customs Act 1901, collectively covering paragraphs (c) to (w) of the DFRS definition, and are defined by reference to the particular activities included in each. The introduction of this change is simply to make the reading and interpretation of the definition easier - that is to say the Government's intention is that the scope of activities included in mining operations will be the same for the off-road credit as it is for the DFRS. [Clause 11]

1.18 Operations for the recovery of a mineral will continue to be taken to have ceased when the process of beneficiation ceases. In the absence of a beneficiation process, they will be taken to have ceased when the mineral or ore is first stored or stockpiled at the place where the mining occurs, or where this does not apply, when they are removed from the ore body or deposit. [Clause 11]

1.19 As in paragraphs (x), (y) and (z) of the DFRS mining operations definition in subsection 164(7) of the Customs Act 1901, mining operations for the off-road credit will not include certain quarrying or dredging activities, the use of vehicles under 3.5 tonnes that are not extensively modified for use underground, and transport activities other than those included in the definitions of mining transport activity, mining water activity, and mining waste activity. [Clause 11]

1.20 The DFRS definition for the term minerals will continue to apply unchanged for the off-road credit. It continues to mean minerals in any form, whether solid, liquid or gaseous and whether organic or inorganic. As for the DFRS, certain substances continue to be excluded from the definition - these are sand, sandstone, soil, slate, clay (other than bentonite or kaolin), basalt, granite, gravel, water and limestone (other than agricultural use limestone).

Subdivision C - Primary production

1.21 The definition of primary production for the off-road credit will be the same as that which applied for the DFRS. It means agriculture, fishing operations, or forestry. [Clause 21]

Agriculture

1.22 For the off-road credit, agriculture means:

•

the cultivation of the soil;

•

the cultivation or gathering in of crops;

•

the rearing of live-stock;

•

viticulture;

•

horticulture;

•

pasturage; or

•

apiculture,

including activities that fall within the definitions of the terms listed in paragraph 1.23. [Clause 22]

1.23 The activities that fall within the definition of agriculture for the off-road credit are the same as those that were eligible for a diesel fuel rebate for agriculture under the Customs Act 1901. The definition, as with the definition of mining operations, has been drafted so as to provide greater certainty and clarity in comparison with the DFRS definition, by introducing the terms 'live-stock activity', 'agricultural soil/water activity', 'agricultural construction activity', 'agricultural waste activity' and 'sundry agricultural activity'.

1.24 In the same manner as in the mining operations definition, these terms are essentially headings for groupings of similar eligible activities from the definition of agricultural activities in the Customs Act 1901, collectively covering paragraphs (e) to (zba) of the DFRS definition, and are defined by reference to the particular activities included in each. Again, the introduction of this change is simply to make the reading and interpretation of the definition easier - that is to say the Government's intention is that the scope of activities included in agriculture will be the same for the off-road credit as for the DFRS. [Clause 22]

1.25 Fishing operations and forestry will continue to be considered separately from agriculture for the off-road credit, and the requirement that to be included in the definition of agriculture, any activity referred to in the definition must be carried out for the purposes of a business undertaken to obtain produce for sale, or purposes that will directly benefit such a business, will be maintained. [Clause 22]

1.26 The expression live-stock includes any animal reared for the production of food, fibres, skins, furs or feathers, or for its use in the farming of land, which is the same as the DFRS definition. [Clause 23]

1.27 Agricultural activity means an activity referred to in any of the paragraphs of the definition of agriculture (other than in hunting and trapping, or use at residential premises in generating electricity, under the 'sundry agricultural activity' heading), provided they are carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale. This definition is the same as for the DFRS. [Clause 28]

1.28 The position of subcontractors in relation to certain operations referred to in the definitions of live-stock activity, agricultural soil/water activity, agricultural construction activity, and sundry agricultural activity is clarified at subclause 28(2). It provides that these operations are included in the definition of agricultural activity when carried out by a subcontractor of the person contracted to carry out the activity.

[Clause 28]

1.29 Agricultural use limestone, as in the DFRS, means limestone for use in the de-acidification of soil in any agricultural activity, other than for the purpose of soil or water conservation on an agricultural property where a core agricultural activity is carried on. [Clause 29]

1.30 The expression approved catchment area has the same meaning as in the DFRS. It means an area in respect of which a soil or water conservation plan has been adopted by, or soil and water conservation agreement made between, the persons who carry on a core agricultural activity within that area. [Clause 30]

1.31 Core agricultural activity means an activity undertaken in the cultivation of the soil, the cultivation or the gathering in of crops, the rearing of livestock, or in viticulture, horticulture, pasturage or apiculture (paragraphs (a), (b), (c) and (d) of the definition of agriculture in subclause 22(1)), if that activity is carried out for the purposes of, or for purposes that will directly benefit, a business undertaken to obtain produce for sale. This definition is the same as for the DFRS. [Clause 31]

1.32 Earthworks, as in the DFRS, means the forming or maintenance of levee banks or windbreaks; contour banking; or land levelling and land grading. [Clause 32]

1.33 Horticulture retains the same meaning as in the DFRS, which includes:

•

the cultivation or gathering in of fruit, vegetables, herbs, edible fungi, nuts, flowers, trees, shrubs or plants;

•

the propagation of tress, shrubs or plants; or

•

the production of seeds, bulbs, corms, tubers or rhizomes.

[Clause 33]

Fishing operations

1.34 The definition of fishing operations is largely the same as that appearing in the Customs Act 1901 for the DFRS, with the exception that a paragraph has been included in order to clarify the eligibility of construction activities undertaken for the purpose of containing fish to be farmed. Unlike the provisions relating to mining, the agriculture provisions in the Customs Act 1901 are silent as to whether diesel fuel used in the construction of ponds, tanks and the like that will be used to contain fish in a farm, is eligible for the rebate.

1.35 The introduction of provisions confirming the eligibility of the construction of ponds, tanks, and other structures to contain the fish to be farmed, will provide certainty for claimants and assurance to the ATO in its administration of the scheme. Except for this change which is to address a technical anomaly in the previous legislation, it is the Government's intention that the scope of activities including in fishing operations will be the same for the off-road credit as for the DFRS.

[Clause 34]

1.36 In addition to such construction activities, the following activities continue to be included in the definition of fishing operations:

•

the taking, catching, or capturing of fish;

•

the farming of fish;

•

the processing of fish on board vessels;

•

pearling operations;

•

the operation of a dedicated mother vessel in connection with the preceding activities; or

•

voyages to or from a port for the purposes of, or trials in connection with, refitting or repairing the vessel or its equipment for purposes integral to the performance of any of the preceding activities.

None of these activities are included if they are conducted otherwise than for the purposes of a business, or for business purposes connected with recreation, sport or tourism. [Clause 34]

1.37 The terms pearling operations and processing, associated with the fishing operations definition, also continue to have the same meaning as in the DFRS. The definition of the term fish has been expanded to include other freshwater resources, in the same way as other resources of the sea or sea-bed are included in the DFRS definition. Fish means freshwater or salt-water fish, and includes:

•

turtles;

•

dugong;

•

crustacea;

•

molluscs; or

•

any other living resources, whether of the sea or of the sea-bed or of freshwater or the bed below freshwater.

Pearling operations means:

•

the taking of pearl shell;

•

the culture of pearls or pearl shell; and

•

includes the taking or capturing of trochus, beche-de-mer or green snails.

Processing means:

•

the cutting up, dismembering, cleaning, sorting or packing of fish;

•

the preserving or preparing of fish; or

•

the production of any substance or article from fish.

[Clause 34]

Forestry

1.38 The expression forestry means the planting or tending of trees intended for felling, or the thinning or felling of standing timber, in a forest or plantation. It specifically includes:

•

the transporting, milling or processing of timber felled in a forest or plantation, in that forest or plantation;

•

the milling of timber at a sawmill or chipmill not situated in the forest or plantation where the timber was felled; and

•

where it is milled at a sawmill or chipmill situated in the forest or plantation where the timber was felled - the transportation of the timber to the mill.

Also included is the making and maintaining, in a forest or plantation, of a road integral to the activities of forestry conducted within that forest or plantation. This is the same definition as is contained in the Customs Act 1901 for the DFRS. [Clause 35]

Subdivision D - Use in marine transport and rail transport

1.39 Marine transport in the DFRS is defined in the Customs Act 1901 to include transport by vessels in or on fresh water, but does not include any transport relating to forestry. The ATO has released administrative guidelines on which activities are eligible for a rebate under the marine transport category, but as there is no further clarification of the meaning in the Customs Act 1901, there has continued to be uncertainty surrounding which activities are actually eligible.

1.40 The situation for rail transport in the DFRS is largely the same as that described in paragraph 1.39 for marine transport.

1.41 In order to remove this uncertainty and align the current administration of the marine transport and rail transport categories with the legislation, the new expressions 'use in marine transport' and 'use in rail transport' have been introduced into the EG(C)S, so as to set out clearly in the legislation which activities in these categories will qualify for the off-road credit.

1.42 For the purposes of the off-road credit, use in marine transport is use in a vessel in marine transport. [Clause 36]

1.43 The term is further defined to include use in a vessel in marine transport for any of the following purposes:

•

loading anything onto, or enabling persons to board, the vessel for transport by it;

•

unloading anything, or enabling persons to disembark, from the vessel after being transported by it;

•

providing towing, mooring or piloting services;

•

providing rescue, firefighting or other emergency services;

•

exploring for, or mining, oil, gas or other minerals;

•

conducting trials of the vessel;

•

conducting aquatic or other scientific research; or

•

hiring out or chartering of a vessel by a tourism business for use in fishing or other recreational activities.

[Clause 36]

1.44 In addition, use on the forward journey of a vessel for the purpose of using the vessel in marine transport or any of the purposes specified in paragraph 1.43, or the return journey after any such use; or on a journey for transporting the vessel to or from a purchaser, seller or person undertaking repairs or improvements to, or maintenance of, the vessel, is also use in marine transport. [Clause 36]

1.45 Finally, use for air-conditioning, heating, lighting, or for any purpose incidental to use of the vessel in marine transport or the purposes discussed in paragraphs 1.43 and 1.44 is also use in marine transport. However, use in a dredge, or in equipment used in or on a dredge is not included. [Clause 36]

1.46 As for the DFRS, the expression marine transport includes transport in or on fresh water for the off-road credit. [Clause 37]

1.47 The definition of use in rail transport is set out in the Energy Grants (Credits) Scheme Bill 2003 in much the same format as that of use in marine transport. It is defined generally to mean that use in a rail vehicle in rail transport or light rail transport is use in rail transport. [Clause 38]

1.48 The term is further defined to include use in a rail vehicle, or in equipment in or on a rail vehicle, for any of the following purposes:

•

loading anything onto, or enabling persons to board, the rail vehicle for transport by it;

•

unloading anything, or enabling persons to disembark, from the rail vehicle after being transported by it;

•

repairing or maintaining rails;

•

observing the condition of rails;

•

reducing fire hazards on or adjacent to rails;

•

rescuing or recovering derailed rail vehicles or carriages or other parts of rail vehicles; or

•

any purpose in connection with using the vehicle in rail transport, or in any of the previously listed purposes.

[Clause 38]

1.49 In addition, use on the forward journey of a rail vehicle for the purpose of rail transport, or any but the last of the purposes listed in paragraph 1.48, or its return journey after any such use, is also use in rail transport. [Clause 38]

1.50 Finally, use for air-conditioning, heating, lighting, or for any purpose incidental to use of the rail vehicle in rail transport or the purposes discussed in paragraphs 1.48 (except the final purpose) and 1.49 is also use in rail transport. [Clause 38]

1.51 The term rail vehicle is defined to mean a train, tram or any other vehicle operating on rails. [Clause 39]