Grainfed levy exemptions under scrutiny

James Nason, 23/05/2012

The Federal Government is looking into why cattle transaction levies were exempted on almost a quarter of all grainfed cattle sold in Australia last year.

The investigation by the Levy Revenue Service has been launched in response to a long-running campaign for clarity on the issue by Queensland cattle producer Rob Moore.

Mr Moore said he was advised by the Levy Revenue Service (LRS) earlier this year that a total 2,262,446 grainfed cattle units were transacted in Australia last year.

Of that number, the LRS’s figures showed that the cattle transaction levy was not paid on 528,577 of those units, or about 23 percent of all grainfed cattle sold last year.

The substantial figure has prompted the obvious question – on what grounds did so many cattle receive exemption from the cattle transaction levy?

The short answer seems to be that no one, including the Levy Revenue Service, can provide a simple answer.

Beef Central posed questions to the LRS on the issue earlier this month, but has yet to receive a response.

Australian Lot Feeders Association chief executive officer Dougal Gordon said that both ALFA and the Cattle Council of Australia had also directed similar questions for clarification to the LRS.

Mr Gordon said he understands the LRS has commenced an investigation to determine the underlying reasons for the exemption certificates provided by processors.

Under the Primary Industries (Excise) Levies Act 1999 Act, provision is made for vendors or processors to claim exemptions in certain circumstances. To claim an exemption, they must supply an exemption certificate or other proof to support their application with their cattle transaction levy return forms.

Mr Gordon said the current LRS audit process only determined the processors from whom exemption certificates were received, and not the reasons for the exemptions.

It was hoped the investigation would provide clarity as to those reasons, and areas where improvements in the existing auditing system are required.

Rob Moore’s view is that the 528,577 non-levied cattle are explained by processors claiming a levy-exemption for cattle fed in their own feedlots under section 5 (4) of the Primary Industries (Excise) Levies Act 1999.

He believes that section effectively classifies processors’ own feedlot cattle in the say way as all other killed cattle, which are exempt from the cattle transaction levy. (Processors pay a red meat processing levy on all cattle they process which goes to the Australian Meat Processing Corporation).

Mr Moore said publicly available information indicated that feedlots directly owned by the four largest processors in Australia – JBS, Teys Cargill, Nippon Meat Packers and Australian Country Choice – have the combined capacity to feed about 750,000 cattle per year.

Based on average feedlot occupancy rates of 62pc in 2012, he estimates that the big four processors would have fed around 465,000 cattle in their own feedlots last year, or 20.5pc of total grainfed units recorded by the LRS last year.

He believes that number goes very close to explaining the 23pc or 528,577 grainfed cattle that did not incur a cattle transaction levy in Australia last year.

“The 2.5pc difference would be for those obscure scenarios such as the very few grainfed cattle that get sold on spec in the saleyards.”

However others point to another clause in the Act which stipulates that the levy is payable by processors when taking delivery of cattle from a related company they own, such as their own feedlot.

The LRS investigation will hopefully provide much needed clarification over what is clearly a grey area, confused by often ambiguously-worded legislation that appears to invite a range of possible interpretations. 



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