The Australian Government has announced significant reforms for the Australian Shipping Industry. The reforms are intended to stimulate the industry and create an internationally competitive industry.



The reform comprises:

1. tax exemption for qualifying activities by Australian shipping companies;
2. simplified licensing for shipping activities;
3. establishment of an Australian International Shipping register; and
4. establishment of a Maritime Workforce Development Forum

These reforms build on the discussion paper and consultation process referred to in Shipping Matters dated 8 December 2010. 



These reforms are welcome but without conclusion of the “compact” with the Labour movement may have little impact on cost competitiveness of Australian ships and very little impact on the Australian industry.



Tax Reforms

Qualifying activities of Australian ship operators will be exempt from corporate income tax. This will ensure that they are competitive with foreign owned and subsidised shipping.

The tax exemption will offer an inclusive approach to defining those activities that qualify for the tax exemption, ensuring our tax regime is competitive with the UK, Singapore and other jurisdictions. To get the benefit of this tax exemption, Australian shipping companies will have to make a 10 year ‘lock in’ commitment to being Australian registered ships and meeting Australian maritime safety conditions.

Access to the tax exemption is also contingent on meeting a minimum training requirement; ensuring that industry plays its part in securing a stable maritime skills base.

Other tax incentives for Australian shipping include:
    a tax scheme combining a reduction in the depreciation period from 20 to 10 years, a balancing charge deferral, and relaxed capital gains tax (CGT) provisions if CGT applies, commonly called roll-over relief;
    exemption from Royalty Withholding Tax liability for foreign owners of vessels where the vessel is leased under a bareboat charter to an Australian company; and
    ensuring Australians can work in international seafaring by providing a seafarers’ tax concession for resident employers of Australian resident seafarers, who spent 91 days or more on international voyages on qualifying vessels in an income year.

    Registration on the Australian primary or international shipping register will be a pre-requisite for access to these tax incentives.


    
Licensing Regime



    The new framework will comprise a three tier licensing regime:
    • a General Licence will provide Australian flagged vessels with unrestricted access to the coastal trades for a period of up to five years at a time. Most of these vessels will also be eligible for the tax incentives;
    • a Temporary Licence will enable foreign flagged vessels to operate in the coastal trades, subject to time, trade and/or voyage conditions. These licences will be available for a period of up to 12 months;
    • an Emergency Licence limited to cargo or passenger movements in emergency situations only such as a natural disaster or other critical emergency.
    Supporting this regime, will be new reporting and publishing arrangements, which will improve transparency in the operation of the regulatory processes. For the first time, Australian registered vessels and all industry operators will have the information necessary to inform their business decisions.

    Existing foreign-registered vessels will have five years to transition to Australian registration.

    Without an increase in the availability of Australian registered ships there may be little difference from the current practices.

    Australian International Shipping Register (AISR)

    Key features of the AISR include:
    •  access to the tax exemption and other tax incentives;
    •  mixed crewing arrangements enabling employment of foreign seafarers at internationally competitive rates and conditions, consistent with the Maritime Labour Convention and other international labour treaties;
    • requirement for a minimum of two Australian seafarers, preferably in the positions of Master and Chief Engineer;
    • workers compensation arrangements consistent with Maritime Labour Convention requirements; and
    • application of the same maritime safety, environmental and occupational health and safety standards as apply to primary Australian register vessels.
    The AISR will address the cost disadvantages currently experienced by Australian companies operating in the global shipping market, while maintaining high safety and environmental standards.

    Maritime Workforce Development Forum

    The maritime industry is confronting a dual challenge; an ageing workforce and an increase in shipping volumes, requiring more seafarers, safety professionals, harbour masters and pilots to ensure Australia s maritime safety and environmental standards are maintained. Securing a long term skills base is essential to a viable Australian shipping industry.

    The Maritime Workforce Development Forum, comprising experienced representatives from across the maritime and skills industries and unions will work with the Australian Government to improve skills outcomes. In undertaking its work, the Forum will work closely with the proposed National Workforce and Productivity Agency.

    Should you wish to discuss this matter please contact your relationship partner.

    Author: Stephen Adrian, Director, Moore Stephens Melbourne



    Contact

    Stephen Adrian
    T  +61 03 8635 1800
    sadrian@moorestephens.com.au

    www.moorestephens.com.au