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2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
SHIPPING REFORM (TAX INCENTIVES) BILL 2012
REVISED 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 the following
legislative packages:
Coastal Trading · Coastal Trading (Revitalising Australian Shipping) Bill
2012
· Coastal Trading (Revitalising Australian Shipping)
(Consequential Amendments and Transitional Provisions)
Bill 2012
Australian International · Shipping Registration Amendment (Australian
Shipping Register International Shipping Register) Bill 2012
Taxation Incentives · Shipping Reform (Tax Incentives) Bill 2012
· Tax Laws Amendment (Shipping Reform) 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 Reform) 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 requirements for 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 is contained in the Explanatory Memorandum to the related Tax Law
Amendment (Shipping Reform) Bill 2012.
1
House of Representatives Standing Committee on Infrastructure, Transport, Regional Development and Local
Government (2008) Rebuilding Australia's Coastal Shipping Industry p 10
2
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_OBPR_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 Transport DIT
Income Tax Assessment Act 1936 ITAA1936
Income Tax Assessment Act 1997 ITAA1997
Income Tax Exemption ITE
Refundable Tax Offset RTO
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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 owners of Australian registered eligible vessels;
· An income tax exemption (ITE) for 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.
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 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.
4
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).
5
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
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