The 5 Bills to reform Australian Shipping were passed by
the House of Representatives on 31 May 2012. From 1 July 2012 the
following changes will apply to shipping taxation.
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.
Companies will be able to elect to apply a reduction in the
depreciation period to 10 years as an alternative to income tax
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
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
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
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.
The shipping reform Bills were entered into the lower house of
Parliament on 22 March 2012.
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
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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