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Tax Reform To Resuscitate Australian Shipping

by Mary Swire,, Hong Kong

28 June 2012

The Australian government hopes it has breathed new life into the nation's shipping industry, with the parliamentary approval of legislation that provides favourable tax conditions to operators who choose to flag their vessels with Australia's new international shipping register.

The reform, described as the most significant overhaul of the Australian shipping industry in 100 years, introduces a full corporate tax exemption, providing an operator commits to 10-year registration. Other changes include roll-over relief for selected capital assets, tax exemptions for seafarers working overseas on qualifying vessels, a royalty withholding tax exemption where vessels are leased by an Australian company from foreign owners under a demise or bareboat charter, and a reduction in the depreciation period from twenty, to ten years.

Reflecting on the importance of the reform, a statement from the Australian government said: "Our reforms put in place a zero tax rate for Australian shipping companies, along with a suite of other fiscal measures, ensuring that Australian ships will be able to compete against their international competitors on a level playing field. [This] completes the first major rewrite of century old maritime laws which will be administered and enforced by the Australian Maritime Safety Regulator, through the Navigation Act 2012. The government is determined to create an environment that will encourage and sustain growth and productivity in our shipping industry. Investing in a competitive and growing domestic shipping industry is good for our economy, our environment and our national security."

Lauding the reform, the Maritime Union of Australia (MUA) said that the Australian shipping industry would be saved from disappearing in its entirety. It noted that Australian ships will be given priority on coastal routes and tax incentives will be offered to Australian operations. This means that shippers on the Australian coast will be able to effectively compete in the domestic freight market under domestic regulations.

MUA National Secretary Paddy Crumlin, described the reform's adoption as "one of the most important days in Australian maritime history; it marks the day that Australian shipping was saved from near-death." In recent years, the number of Australian licensed trading vessels has been allowed to drop at an alarming rate he said, from 55 in 1996 to 21 today.

"This package of bills will finally allow Australian ships, operating to Australian standards, to compete with Flag Of Convenience vessels in our domestic market while winning back a share of our export shipping."

"Australia is an island nation with a huge amount to export. Revitalizing our own shipping industry will create employment and build productivity, while sustaining business opportunities in ship financing and many ancillary shipping services in this country."

TAGS: tax | business | marine | tax incentives | royalties | law | corporation tax | Australia | legislation | dividends

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