Australian Tonnage Tax Proposed

by Mary Swire, Tax-News.com, Hong Kong

16 August 2010

If re-elected, the Australian government has promised to introduce tax and other measures to strengthen Australia’s shipping industry, by reducing costs for Australian ships and placing the industry on a sustainable footing with regard to both its international and domestic competitors.

It was said that Australia is reliant on shipping for 99% of its trade by volume, while Australia makes up 10% of the world’s entire seaborne trade. In 2008, more than 834m tonnes of international cargo moved across Australian wharves on 4,000 ships in more than 11,000 voyages.

However, there are only 30 Australian registered major trading ships today – down from 55 ships in 1995. Without remedial action, it was pointed out that Australia faces the continued decline of its shipping fleet and the loss of the maritime skills base.

Under the government’s proposals, Australian companies using Australian registered ships will be able to pay a new tonnage tax (a low flat tax based on the weight of the vessel), as is the case, for example, in the United Kingdom, France and Germany.

On the other hand, such companies will still have the option to remain with the current corporate income tax regime, which will be bolstered by accelerated depreciation arrangements.

The government will also make changes to income tax arrangements for Australian-resident international seafarers to remove disincentives for companies employing Australians.

An Australian International Shipping Register will be established, in order to facilitate Australian participation in international shipping, as will a Maritime Workforce Development Forum of industry, unions and education providers to improve and increase access to maritime training. Mandatory training requirements will be introduced in order for shipping companies to be eligible for the new tonnage tax.

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