Last week, the Australian Senate passed a package of shipping industry reforms, which will come into force from 1 July 2012.
These reforms include the approval of the following Bills:
- Coastal Trading (Revitalising Australian Shipping) Bill 2012 (Coastal Trading Bill)
- Coastal Trading (Consequential Amendments and Transitional Provisions) Bill 2012 (Coastal Trading Consequential Bill)
- Shipping Registration Amendment (Australian International Shipping Register) Bill 2012 (AISR Bill)
- Shipping Reform (Tax Incentives) Bill 2012
- Tax Laws Amendment (Shipping Reform) Bill 2012
Below is a short summary of the implications of each of these Bills. For a more detailed analysis, please refer to our previous commentary on the exposure drafts of these Bills which are available here and here.
The tax concessions introduced are as described in our earlier update with only a few changes made to the exposure drafts, including that the rate of seafarer tax offset has been increased from 27 per cent to 30 per cent.
Commencement of the tax concessions will be as follows.
- Income tax exemption for certain shipping activities will be available as from 1 July 2012, for ship operators who obtain an Income Tax Exemption Certificate which applies as from that date.
- Accelerated tax depreciation, balancing charge deferral and roll-over relief on certain vessels will be available as from 1 July 2012, for ship owners who obtain a General Certificate in respect of the vessel which applies as from that date. Accelerated depreciation will apply for vessels owned before 1 July 2012 as if they were acquired on that date.
- The seafarer tax offset will be available for employers of Australian seafarers as from 1 July 2012, provided some person (not necessarily the employer) holds either an Income Tax Exemption Certificate or a General Certificate in respect of the vessels on which the seafarers are employed.
- Royalty withholding tax exemption for non-Australian residents chartering certain vessels to Australian charterers will apply to payments made on or after 1 July 2012.
The first deadline to obtain either an Income Tax Exemption Certificate or a General Certificate for the 2012/13 tax year will be application for an Income Tax Exemption Notice or General Notice by 31 March 2013. Regulations to address the training and management requirements of obtaining an Income Tax Exemption Certificate are expected to be released in the near future.
Australian International Shipping Register
One of the key reforms to revitalise the Australian shipping industry is the establishment of a second shipping registry being the Australian International Shipping Register (AISR).
Under the regime, “Australian-owned” trading ships or Australian-based companies with bareboat charters will be able to register on the AISR. The definition of “Australian-owned” or operated by an “Australian operator” remains unchanged from the current position under the Shipping Registration Act 1981 (Cth).
The eligibility for registration on the AISR is limited to Australian owned or operated ships in order to satisfy Australia’s obligations under the United Nations Convention on the Law of the Sea that there “must be a genuine link between the State and the ship registered in its territory” and to minimise any risk that the AISR is viewed as a Flag of Convenience registry.
Unlike a number of the other international registration regimes such as the Danish International Registry, the AISR does not allow a “dual flag” arrangement. It is a condition of registration that a ship is not registered on a foreign registry before it can be registered on the AISR, that is, it must have its foreign registration “closed” prior to being registered on the AISR. Under the new regime, there is no ability to suspend ‘Australian’ nationality should a ship be bareboat chartered to a foreign charterer.
The AISR Bill also introduces a civil penalty and infringement enforcement scheme. The new regime provides that the Australian Maritime Safety Authority may issue infringement notices for contravention of a civil penalty provision.
The Bill also sets out a number of labour requirements which are discussed in more detail here.
Key changes to the new coastal trading regime
The Coastal Trading Bill and the Coastal Trading Consequential Bill will make the following key changes have been made to the new coastal trading regime compared to what was set out in the exposure drafts of these Bills.
Applying for a licence
A shipper may no longer apply for a general or temporary licence. However, shippers may later be allowed to apply for a general licence if it is later prescribed in the regulations.
At the time of making an application, an applicant for a general or temporary licence must now clearly identify the name of the vessel and the IMO number of the vessel. Applicants for a temporary licence must also clearly identify the name of the ports (of loading and unloading) and the type of cargo to be carried at the time of making an application.
There is no longer a requirement to identify the shipper of the cargo at the time of the application. This change may mean that the new regime may give rise to a type of “licence market” whereby an applicant may be able to obtain a temporary licence and sell the freight task permitted by the terms of the licence on an open market.
Mandatory reporting requirements
The timeframe for general licence holders to submit mandatory information to the Department of Infrastructure and Transport has been extended from 10 business days to 20 business days after the end of a financial year.
Under the new framework, a breach of condition of general temporary licences may be subject to a civil penalty to a maximum of A$5,500 in the case of an individual and A$27,500 in the case of a body corporate. Previously, this had only applied to breaches of conditions of emergency licences.
Temporary licence: right of review to the Administrative Appeals Tribunal
The Coastal Trading Bill now provides a right of review to the Administrative Appeals Tribunal in relation to the granting or refusing of a temporary licence application, which is consistent with the current regime provided under the Navigation Act.