Tax Reforms
Income Tax Exemption
Qualifying activities of corporate Australian ship operators will be exempt from income tax. Repatriation of the profits to shareholders will be an unfrankable distribution thereby undoing the tax exemption.
Accelerated Depreciation
Companies will be able to elect to apply a reduction in the depreciation period to 10 years as an alternative to income tax exemption.
Balancing Adjustments on disposal of Vessels
Any assessable balancing charge is deferred until the second income year after the disposal occurs. The balancing charge may be rolled over into a replacement vessel cost base. This measure only applies where the income tax exemption does not apply at the time of disposal.
Capital Gains Tax
Capital gains made on disposal of income tax exempt vessels are exempt from capital gains tax.
Loss Wastage Rule
10% of exempt shipping income will be applied against and will absorb current or prior year losses from other activities of a corporation.
Royalty Withholding Tax
From 1July 2012 bareboat charter fees paid by a resident Australian company for a qualifying vessel will be exempt from Royalty Withholding Tax.
Refundable Tax Offset for Seafarers
A refundable tax offset for 30% of the amount of salary or wages paid in respect of Australian resident seafarers who spent 91 days or more on international voyages on qualifying vessels in an income year will be paid to the resident companies who employ the seafarers.
Information Seminar
In order to prepare for a 1 July 2012 implementation date, the Department of Infrastructure and Transport will hold a half day information seminar on the shipping tax reforms. This seminar will be held from 9.30 am to noon on Tuesday, 12 June 2012. It will be held at the offices of Infrastructure Australia, Level 21, 126 Phillip Street, Sydney NSW 2000.
History
The shipping reform Bills were entered into the lower house of Parliament on 22 March 2012.
See our "Shipping Matters!" at the following address. http://moorestephensresources.com.au/articles/639/1/Legislation-for-Reform-to-Australian-Shipping-Regime-Introduced-into-Parliament/Page1.html
Shortly after this the Bills were referred to three committees for which further industry submissions were requested (the closing date for which was 13 April). The three committees are as follows:
- Senate Economics Legislation Committee; Report due 19/06/2012– the committee is yet to report its findings back to the lower house.
- Senate Education, Employment and Workplace Relations Legislation Committee; Committee report (24 April 2012) – access here
- House Standing Committee on Infrastructure and Communications; On 24 May 2012 this Committee recommended that the Bills be passed by the House of Representatives.
In substance the Bills are the same as those introduced in March and almost identical to the Draft Bills that were provided to industry in February.
See our "Shipping Matters!" of February 2012 at the following address http://moorestephensresources.com.au/articles/629/1/Draft-Tax-Legislation-for-reform-to-Australian-shipping-regime-released/Page1.html
and for an explanation of the changes please see http://moorestephensresources.com.au/articles/639/1/Legislation-for-Reform-to-Australian-Shipping-Regime-Introduced-into-Parliament/Page1.html
The Bills ignore most of the Industry comments and the matters we raised in our submission.
These reforms are welcome but not allowing the tax exempt nature of shipping income to flow through to shareholders may compromise the effectiveness of the reforms in stimulating investment in Australian shipping.
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