The Definition Provisions
18.5. Production of timber from tree farming was regarded as primary production prior to 1963, when the definition of ‘primary production’ in section 6 (1) was amended to include ‘production resulting from … forest operations’. However, the definition of ‘forest operations’, also inserted in section 6 (1) in 1963, in addition to describing tree farming operations extends to the activities of persons who merely fell trees in a forest.
18.6. The inclusion of the activity of felling trees in the definition of ‘primary production’ has the consequence that persons who, in a business operation, fell trees in a forest carry on the business of primary production and are thus entitled to the benefit of the averaging provisions, even though they own no forests or plantations but obtain their timber supplies through rights or licences to cut timber given to them by other persons. And it might also have the consequence that logging contractors who do not become the owners of the fallen timber are to be regarded as persons carrying on the business of primary production entitled to the benefit of averaging.
18.7. The introduction of the definition of ‘forest operations’ into the Act was accompanied by an amendment to section 54, which provided for the allowance of depreciation on structural improvements used in forest operations. Thus in so far as the definition of forest operations describes activities additional to tree farming, it extends the scope of allowance of depreciation.
18.8. The Committee can see no reason why persons who carry on a business of felling timber but who do not plant or tend trees in a forest or plantation for the purpose of felling should be regarded as primary producers entitled to the benefit of the averaging provisions: it does not appear to the Committee that they are especially subject to income fluctuation. It accordingly recommends that in so far as the definition of forest operations extends beyond the concept of tree farming it should expressly apply only for the purpose of allowance of depreciation.