Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
SHIPPING REFORM (TAX INCENTIVES) BILL 2012
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Infrastructure and Transport
the Honourable Anthony Albanese, MP)
Shipping Reform (Tax Incentives) Bill 2012
POLICY CONTEXT
The Shipping Reform (Tax Incentives) Bill 2012 is part of the Government's
Stronger Shipping for a Stronger Economy legislative package. The full
policy context and background to the package is set out in the explanatory
memorandum for the Coastal Trading (Revitalising Australian Shipping) Bill
2012.
Stronger Shipping for a Stronger Economy Legislative Package
The shipping reforms are an integrated policy framework consisting of three
legislative packages:
|Coastal Trading |Coastal Trading (Revitalising Australian |
| |Shipping) Bill 2012 |
| |Coastal Trading (Revitalising Australian |
| |Shipping) (Consequential Amendments and |
| |Transitional Provisions) Bill 2012 |
|Australian |Shipping Registration Amendment (Australian |
|International |International Shipping Register) Bill 2012 |
|Shipping Register | |
|Taxation Incentives |Shipping Reform (Tax Incentives) Bill 2012 |
| |Tax Laws Amendment (Shipping Reforms) Bill 2012 |
OUTLINE
The Shipping Reform (Tax Incentives) Bill 2012, provides a mechanism for
the shipping industry to obtain a certificate as an initial step in gaining
access to a range of taxation concessions for the shipping industry
(additional criteria are contained in the Tax Laws Amendment (Shipping
Reforms) Bill 2012) to encourage ship ownership and ship operations in
Australia as well as encourage the employment of Australian seafarers.
Shipping is a global industry characterised by intense competition among
international companies with relatively few barriers to entry and exit.
More than thirty foreign jurisdictions, with which Australian vessels must
compete, receive the benefits of fiscal support (e.g. tonnage tax, taxation
concessions/exemptions, subsidy schemes) under their home registries.
Many of these countries have introduced fiscal support measures as a means
of retaining ships on their national registers rather than see their
national flag ships move to foreign registers over which they have less
direct control. This action has seen their formerly shrinking national
registries attract back many of the defecting ships and is consistent with
the findings of the House of Representatives Committee on Infrastructure,
Transport,
Regional Development and Local Government which noted that supportive
fiscal measures had resulted in an increase in additional tonnage back to
national registers.[1]
The tax incentives will provide for the following:
. Accelerated Depreciation and rollover relief for owners of Australian
registered eligible vessels;
. An income tax exemption (ITE) for Australian operators of Australian
registered eligible vessels on qualifying shipping income;
. A refundable tax offset for employers who employ eligible Australian
seafarers; and
. An exemption from royalty withholding tax for foreign owners of
eligible vessels leased under a bareboat or demise charter to an
Australian operator.
This Bill is the first step a taxpayer will need to take in establishing
their eligibility to access the tax concessions. It provides for the issue
of certificates after the end of the financial year to applicants who meet
the requirements of the regime. It also provides companies applying for
these concessions for the first time, the opportunity to obtain a 'notice'
during the first year of entry that will give them a degree of comfort that
the arrangements they propose will meet the requirements of the Shipping
Reform (Tax Incentives) Bill 2012, thus reducing the pressure on both them
and the Department when they are compiling their tax returns.
In summary the new legislation will:
. Establish eligibility criteria for access to the taxation concessions
by defining an
o Eligible company, and
o Eligible vessel;
. Provide a framework for the Department of Infrastructure and Transport
(the Department) to issue applicants with a notice and later a
certificate confirming they have satisfied the Department's
requirements for the certification;
. Provide for the Department to collect and collate data in relation to
these reforms; and
. Provide for decisions to be reviewed if disputed.
FINANCIAL IMPACT STATEMENT
The Bill is not expected to have any significant financial impact. The
cost of the taxation concessions will be contained in the Explanatory
Memoranda of the related Tax Law Amendment (Shipping Reform) Bill.
REGULATORY IMPACT STATEMENT
A Regulatory Impact Statement was prepared on the shipping reform package.
This can be accessed at:
http://www.infrastructure.gov.au/maritime/shipping_reform/files/RIS_post_OBP
R_20110816_formatted.pdf
Acronyms
|Administrative Appeals Tribunal |AAT |
|Australian Business Number |ABN |
|Australian Company Number |ACN |
|Accelerated Depreciation |AD |
|Australian Taxation Office |ATO |
|Department of Infrastructure and |DIT |
|Transport | |
|Income Tax Assessment Act 1936 |ITAA1936 |
|Income Tax Assessment Act 1997 |ITAA1997 |
|Income Tax Exemption |ITE |
|Refundable Tax Offset |RTO |
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011
Shipping Reform (Tax Incentives Bill) 2012
This Bill is compatible with the human rights and freedoms recognised or
declared in the international instruments listed in section 3 of the Human
Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Bill
This Bill provides a mechanism for the shipping industry to obtain a
certificate as an initial step in gaining access to a range of taxation
concessions (additional criteria are contained in amendments to taxation
law) to encourage ship ownership and ship operations in Australia as well
as encourage the employment of Australian seafarers. This Bill is the
first step a taxpayer will need to take in establishing their eligibility
to access the tax concessions. It is expected that this legislation will
take effect from 1 July 2012.
The tax incentives will provide for the following:
. Accelerated Depreciation for Australian owners of Australian
registered eligible vessels;
. An income tax exemption (ITE) for Australian operators of
Australian registered eligible vessels on qualifying shipping
income;
. Access to Accelerated Depreciation and the ITE for Australian
owner-operators, where they are able to access both concessions
sequentially for the one vessel but not concurrently;
. A refundable tax offset for employers who employ eligible
Australian seafarers; and
. An exemption from royalty withholding tax for foreign owners of
eligible vessels leased under a bareboat or demise charter to an
Australian operator.
The purpose of the Bill is to provide a gateway to the concessions
contained in the Income Tax Assessment Act 1997 for the Australian shipping
industry.
In order to access the accelerated depreciation, ITE or refundable tax
offset a company must demonstrate that it is a trading or financial
corporation under Australian law with an eligible vessel, (that is a
seagoing vessel not excluded by the provisions of section 10(4), of 500
gross tonnage or more and is registered on the Australian General or
International shipping registers. In addition a company wishing to access
the ITE must meet the management requirements - these requirements are
directed an increasing the maritime activities conducted in Australia
relating to strategic, commercial, technical and crew management. To
access the ITE it must also have a training plan directed at increasing the
employment and training of Australian seafarers. Both the management and
training requirements will be elaborated in regulations.
Human rights implications
The Bill engages the following human rights:
Right to Privacy
Right to freedom of opinion and expression
Article 17 of the International Convention on Civil and Political Rights
(ICCPR) specifies that no one shall be subjected to arbitrary or unlawful
interference with his privacy, family, home or correspondence, nor to
unlawful attacks on his honour and reputation, and that everyone has the
right to the protection of the law against such interference or attacks.
Article 19 provides, amongst other things that subject to restriction in
certain limited situations everyone shall have the right to freedom of
expression; this right shall include freedom to seek, receive and impart
information and ideas of all kinds, regardless of frontiers, either orally,
in writing or in print, in the form of art, or through any other media of
his choice.
Clauses 18 and 19 of the Bill enable the Minister (or Department on his
behalf) to seek information, including documents, from anyone the Minister
reasonably believes can provide him with information in relation to a
company's status as a trading or financial corporation and its registration
on the Australian registers, and in the case of the ITE the management and
training requirements, which form the basis of the company's application
for a certificate (or notice) to enable its access to the shipping
concessions. Individuals have 14 days after the request has been made to
produce the information or documents.
While the request may be directed to an individual the information sought
would in all cases be in respect of a company as the concessions are
limited to incorporated entities. Clauses 22 and 23 enable the Minister to
retain and make copies of documents for as long as is necessary to replace
them with certified copies for use in all courts and tribunals. Clause 20
establishes an offence for failure to comply, but clause 21 allows for
compensation to pay for the reasonable costs of complying with the request.
It should also be noted that a decision made by the Minister in relation to
a refusing to issue, vary or revoke a certificate or notice is reviewable
by the Administrative Appeals Tribunal.
While this Bill imposes an obligation to provide information or documents
relevant to demonstrating how a company meets the management and training
requirements described in the Bill and in regulations, the Minister must
have reasonable grounds to seek that information or documents. The ability
to compel the production of certain information is considered necessary,
reasonable and proportionate because a corporate entity that has been
granted a certificate will be entitled to substantial benefit in the form
of reduced or exempt income tax so long as it subsequently complies with
the provisions in the Income Tax Assessment Act 1997 (ITAA).
Clause 25 of the Bill allows the Secretary of the Department to publish
certain aggregate information about an entity, a consolidated group or MEC
or a vessel and to disclose information to the Commissioner (of Taxation)
or other person specified by regulation. However, the information that may
be published or disclosed relates to the grant of a Certificate, or a
Notice, but excludes personal information (within the meaning of the
Privacy Act 1988). The information is therefore confined to that which
relates to companies seeking access to the concessions and is considered
necessary, reasonable and proportionate as it will allow the publication of
information that will allow assessment of the effectiveness of the
concessions and where appropriate the disclosure of relevant information to
the Australian Taxation Office, should for example it wish to undertake an
audit of a company's claims.
Conclusion
The Bill is compatible with human rights because the extent of any
limitation of human rights is reasonable and proportionate to the
information sought and benefits conveyed to applicants.
Minister for Infrastructure and Transport, the Hon Anthony Albanese MP
NOTES ON CLAUSES
Chapter 1-Preliminary
Part 1-Short title and commencement
Clause 1 Short title
This clause provides for the Bill, when enacted, to be cited as the
Shipping Reform (Tax Incentives) Act 2012.
Clause 2 Commencement
This clause sets out the commencement date for the provisions contained in
the Bill to be 1 July 2012.
Part 1-Objects and simplified outline of Bill
Clause 3 Object of Bill
In line with the general outline above this clause sets out the Bill's
purpose to provide a framework for the taxation incentives for the
Australian shipping industry, to encourage ship ownership and ship
operations in Australia as well as encourage the employment of Australian
seafarers.
Clause 4 Simplified outline of Bill
This clause sets out the contents of the Bill in summary form and indicates
its role in relation to accessing the taxation concessions provided for in
amendments to the Income Tax Assessment Act 1997 (ITAA1997). An
illustration of how this Bill fits into the process of accessing the tax
concessions can be found at figure 1 below:
Figure 1: Access to the tax concessions: process
[pic]
. Notice is for current income year
. Certificate is for previous income year and may apply for part year
. Certificates apply per applicant, per vessel, per income year
Clause 5 Definitions
Clause 5 sets out the definitions in this Bill. Most of these are self
explanatory. Particular attention is drawn to the definitions of shipping
cargo and shipping passenger which are important to the interpretation of
qualifying activities in the amendments to the ITAA1997 in respect of the
Income Tax Exemption (ITE).
The definition of shipping cargo is intended to be broad and encompass
everything carried for some form of consideration. Similarly the definition
of shipping passengers includes all paying passengers. Tonnage is a
measurement of the volume of a ship's enclosed spaces that is governed by
the International Convention on Tonnage Measurement of Ships 1969 and
applies to all ships built after July 1982.
Clause 6 Management requirements
This clause provides for the Regulations to specify the management
requirements for the ITE. To be eligible for the ITE companies will need to
satisfy additional requirements that involve having a substantial
proportion of commercial, technical or strategic operations as well as crew
management in Australia.
This provision is aimed at growing the maritime cluster of activities
performed in Australia. It is intended that the regulations be framed in a
way that enables companies to demonstrate a sufficient mix of these
activities are undertaken in Australia.
Clause 7 Application to external Territories and outside Australia
This clause extends the Bill to every external Territory and to acts,
omissions, matters and things outside Australia.
Part 2-Certificates for vessels
Clause 8 Certificates for vessels
This clause provides for the Minister (or the Department on his behalf) to
issue a certificate to an applicant if they satisfy certain conditions.
These conditions are that the applicant is a company, that they have an
eligible vessel (defined in Clause 10) and that the vessel is intended to
operate as part of the 'blue water' fleet. If the applicant is seeking
access to the ITE, the applicant will also need to satisfy additional
requirements. As mentioned in Clause 6 the applicant will need to satisfy
the management requirements as well as the training requirement which will
be spelt out in Regulations to this Bill.
[The training requirement is currently being developed by the Maritime
Workforce Development Forum for consideration by the Minister.]
The certificate will apply for a whole or part year depending on when the
applicant is able to satisfy all of the conditions. For example if a
company demonstrates its eligibility for entry into the ITE from a
particular date during the financial year then that will be the date of
effect.
If the certificate is being sought for the first time in 2012-13 or
subsequent, the applicant will be able to apply for a notice from the
Department for that first year. The role of the notice provision is set out
in clause 14, and in figure 1.
The Department may seek further information from the applicant before a
certificate is issued (Clause 12) and will not issue a certificate until
the applicant meets all requirements. Failure to supply information may
result in a certificate not being issued.
Clause 9 Shipping exempt income certificates not to be issued in certain
circumstances
A company (operator) which has been in the ITE regime and has subsequently
failed one of the requirements may in certain circumstances be locked out
of the ITE for a period of up to ten years. The Minister will determine the
length of any lock out period under sub clause 9 (3). This determination
under sub clause 9 (5) is not a legislative instrument within the meaning
of section 5 of the Legislative Instruments Act 2003. It is included only
to assist readers.
Clause 9 also provides an additional requirement in that the applicant will
need to make a declaration stating they are not an associate of another
operator to establish their credentials. Associate will have the same
meaning as in section 318(2) of the ITAA1936. For example; Company A
operates the vessel, Diamond Lucy, and received a shipping exempt income
certificate for the 2012-13 year. Company A was locked out of the ITE
regime in 2013-14. Neither company A nor any associate of Company A may
obtain a shipping exempt income certificate for the Diamond Lucy until the
lock out period has expired.
Note that if the applicant fails eligibility for a shipping exempt income
certificate, it could remain eligible for a certificate in relation to the
other tax concessions that do not rely on adherence to the management and
training requirements.
Clause 10 Requirements for vessels
This clause sets out what vessels are eligible for the tax concessions.
Vessels will need to be over 500 gross tonnes and registered under either
Australia's primary or International Shipping Registers. Additionally
vessels will not be eligible if they fall within the list of excluded
vessels in subclause 10(4). The list aims to confine the concession to the
so called 'blue water' fleet. Cargo Vessels between 200 and less than 500
gross tonnes may also be eligible if they are primarily used in regional or
remote Australia and the Minister exercises the discretion to admit them.
Vessels operating wholly or mainly from a stationary position are vessels
which operate as floating hotels or casinos and are vessels anchored more
or less permanently.
Clause 11 Applying for a certificate
This clause sets out that an application for a certificate must be in the
approved form, and will be subject to a fee for cost recovery purposes. The
fee will be determined in the Regulations to this Bill. The application
form needs to be submitted to the Department at least 30 days before the
applicant's tax return is to be lodged for the year in which the concession
is sought.
The applicant will complete an application form which will include details
on the applicant including their company name, ACN and ABN, the name and
registration number of their eligible vessel(s), the dates on which they
are seeking a certificate, and the tax concession for which they are
seeking a certificate. Tax file numbers will not be required.
This clause also sets out how the application form for the certificate will
act as a reporting tool to the Department on which tax concessions have
been claimed in previous tax years. If the applicant has previously
claimed Accelerated Depreciation ( AD) or the ITE on one or more vessel(s)
it must include in the application form the name and number of the vessels
it has claimed either AD or the ITE on and if the applicant has claimed the
seafarer RTO it must also state on the application form the number of
seafarers for whom it has claimed a Refundable Tax Offset (RTO). These
details will enable the Department to monitor the success of the
concessions.
If the form is an application for the ITE it will also contain information
relevant to the management requirements in clause 6 and details of the
agreed training plan which may require information about a company's future
intentions.
Clause 12 Minister may request further information
The Minister ( or the Department on his behalf) may request further
information from the applicant. Such further information will need to be
returned to the Department within ten days after the request was made.
Clause 13 Non-compliance relating to certificates
If the Department determines that an applicant has failed to supply
additional information requested under Clause 19 or the applicant
subsequently fails one of the requirements for a certificate that has been
issued, a period of grace may be allowed for the claimant to rectify any
breach of the requirements. If, however, the claimant fails to rectify the
breach the Minister may vary or revoke the certificate, by writing to the
applicant.
For example; S & L Pty Ltd operate the Summer Princess (an Australian
registered luxury cruise liner) and purchased a 50,000 tonne bulk carrier
(Diamond Lucy) on 1 July 2012. In March 2013 S & L Pty Ltd submit an
application for a notice to the Department seeking access to the ITE for
the Summer Princess and to gain access to AD for the Diamond Lucy. The
Department assesses S & L's application and issues the notice. In November
2013, S & L Pty Ltd submit an application form for a certificate for each
vessel which is subsequently granted and applies for the 2012-13 tax year.
Later in 2014, the Department is advised that S & L are not meeting all the
requirements for the ITE and following a series of letters revokes the ITE
certificate for the Summer Princess. S & L Pty Ltd will need to amend
their company return to reflect the revocation from the date of its effect.
A data exchange protocol for companies will be introduced between the
Department and the ATO as part of these reforms (Clause 26). S & L Pty Ltd
will still hold a valid certificate for AD on the Diamond Lucy for the 2012-
13 tax year.
Part 3-Notices for vessels
Clause 14 Notices for vessels
This clause provides for the Minister (or the Department on his behalf) to
issue a notice to an applicant if they satisfy certain conditions. A
notice is designed to:
(a) provide a certain level of comfort for the applicant that they
will subsequently qualify for a certificate (Clause 8) and hence can
seek to complete the first step in accessing the various tax
concessions provided under the cognate amendments to the ITAA1997
contained in the Tax Laws Amendment (Shipping Reform) Bill; and
(b) provide the Department with timely data in order to quantify the
extent to which the Australian shipping industry is being assisted by
these tax concessions.
The Department will issue a notice if the following conditions are met in
the application form. The conditions are that the applicant is a company,
that they have an eligible vessel (defined in Clause 10) and that the
vessel is intended to operate as part of the 'blue water' fleet.
If the applicant is seeking access to the ITE, the applicant will also need
to satisfy additional requirements. As mentioned in Clause 6 the applicant
will need to satisfy the management requirements as well as the training
requirement which will be spelt out in the Regulations to the Bill.
Similarly to clause 13 for certificates, a notice may not be issued if the
applicant fails to provide additional information sought under Clause 16.
A company may also write to the Minister seeking guidance on how the Bill
will apply to a prospective venture.
A notice provides a company that is investing in vessels or in the
Australian maritime industry generally with an early indication of
eligibility.
Clause 15 Applying for a notice
This clause sets out that an application for a notice must be in the
approved form, and will be subject to a fee for cost recovery purposes. The
fee will be determined in the Regulations to the Bill. The application form
needs to be submitted to the Department at least three months before the
end of the income year in which the applicant intends to seek access to a
tax concession. After that the applicant would wait until the end of the
financial year and submit an application for a certificate.
The applicant will complete an application form which will include details
on the applicant including their company name, ACN and ABN, the name and
registration number of their eligible vessel(s), and the dates on which
they are seeking a notice. The application form will also include which tax
concession they will be seeking a certificate for in the following year.
Clause 16 Minister may request further information
The Minister (or the Department on his behalf) may request further
information from the applicant if required to confirm their eligibility for
a notice. Such further information will need to be returned to the
Department within 30 days after the request was made.
Clause 17 Non-compliance relating to notices
If the Department determines that an applicant has failed to supply
additional information requested under Clause 16 or the applicant
subsequently fails one of the requirements for a notice that it has been
issued, a period of grace may be allowed for the claimant to rectify any
breach of the requirements. If, however, the claimant fails to rectify the
breach the Minister may vary or revoke the notice, by writing to the
applicant.
Part 4-Requesting information and documents
Clause 18
This clause provides for the Minister (or Department on his behalf) to seek
information, including documents, from a person connected with an
applicant, other than a lawyer, in relation to the requirements for
certificates, including exempt income certificates, and notices, including
exempt shipping income notices.
Clause 19 Requesting information or documents
This clause allows the Minister to request information or documents in
relation to certificates and notices and for the person to produce said
information or documents within 14 days after the request has been made.
Clause 20 Failing to give information or produce the documents
A person will have committed an offence if he/she fails to give the
requested information (including any documents) requested under clause 19.
Clause 21 Copying documents - compensation
A person is entitled to reasonable compensation for costs incurred in
complying with clause 19.
Clause 22 Copies of documents
The Department may inspect and make copies of a document relating to clause
19.
Clause 23 Minister may retain documents
The Minister (Department) may retain a document under clause 19 only for as
long as it takes to replace the document with a certified copy for use in
all courts and tribunals.
Part 5-Miscellaneous
Clause 24 Review by Administrative Appeals Tribunal
Clause 24 sets out that a decision made by the Minister in relation to
refusing to issue, vary or revoke a certificate or notice is reviewable by
the Administrative Appeals Tribunal.
Clause 25 Disclosing information
This clause allows the Minister (Department) to publish aggregated
information it has obtained from applications to certificates or notices
provided it is not personal information within the meaning of the Privacy
Act 1988. Typically this information would indicate the impact that the
tax concessions are having in terms of take up and growth in the Australian
registered fleet.
Clause 26 Approved forms
This clause describes how applications to access the tax concessions must
be in writing and include all relevant information.
Clause 27 Delegation
This clause allows for the Minister to delegate any or all of his or her
functions or powers to senior officers of the Department or of the
Australian Taxation Office.
Clause 28 Regulations
This clause allows for the making of regulations necessary for this bill.
-----------------------
[1] House of Representatives Standing Committee on Infrastructure,
Transport, Regional Development and Local Government (2008) Rebuilding
Australia's Coastal Shipping Industry p 10