Australia's shipping industry received a much needed life-line when the report 'Rebuilding Australia's Coastal Shipping Industry' was tabled into Federal Parliament on 20 October 2008.
The report tabled by the Committee on Infrastructure, Transport, Regional Development and Local Government makes 14 key recommendations for legislative and industry reform. This included the following three recommendations within Australia's tax framework:
- the introduction of an optional tonnage tax regime in Australia that is linked to mandatory training requirements;
- the re-introduction of accelerated depreciation arrangements; and
- a review of Section 23 AG of the Income Tax Assessment Act 1936;
The aim of the recommendations is to revitalise the diminishing Australian shipping industry. The Committee chair, Labour MP Catherine King said the Australian shipping industry has been shrinking particularly over the past decade, with increased reliance on foreign vessels.
"The Australian coastal shipping industry has been in decline for some time. Increasingly, foreign vessels have been employed to carry goods around the Australian coast to the detriment of the Australian coastal shipping fleet," Ms King said.
Tonnage tax
The report recommends the introduction of a tonnage tax for Australian registered ships that would give companies the option of paying tax based on the tonnage of their ships rather than on the profits of their trade. The report explains that "this can be beneficial in years where ships have made a lot of money but may have a negative impact in years where ships do not".
"Tonnage taxes have already been introduced in several countries including the UK, Belgium, Germany, Greece, Norway, Denmark and the USA. In the UK, it was found the tonnage tax has been linked in increasing the tonnage on the UK register but to a less extent the number of ships", the report says.
"There is a general consensus across various maritime industry stakeholders that the introduction of a tonnage tax in Australia would have a positive effect on the industry." An optional tonnage tax regime has been suggested to linked mandatory training requirement. This would encourage ship owners to register and remain registered in Australia and by linking the tax to training requirements the cost of training seafarers may be alleviated somewhat.
Accelerated depreciation
An accelerated depreciation regime was in place in the early 1990s but was subsequently scrapped in 1996 when Australia had one of the youngest fleets in the world. The Committee believes a re-introduction would stimulate growth in the fleet and encourage investment in new ships. The committee referred to write off periods of 5 and 7.5 years in their discussion.
The Committee suggests that an accelerated regime would have a positive impact on the size of the Australian fleet; with flow-on effects such as greater training opportunities and modern design which can improve on operating efficiencies and could be more environmental friendly.
Retention of qualified seafarers
Under section 23AG of the Income Tax Assessment Act 1936, an Australian resident engaged in work in a foreign country is exempt from tax if they have engaged in that work for more than 90 days. For seafarers this test can be difficult to pass since the high seas are not considered a foreign country. As a result, Australian seafarers tend to receive lower after tax salaries (relative to seafarers of other nations) because of their Australian tax burden.
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