House of Representatives

Tax Laws Amendment (Shipping Reform) Bill 2012

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Chapter 7 Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights ( Parliamentary Scrutiny ) Act 2011

Tax Laws Amendment (Shipping Reform) Bill 2012

7.1 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

7.2 This Bill provides a number of tax incentives designed to stimulate investment in Australian shipping and encourage Australian ownership of ships and ship operations.

Income tax exemption for ship operators

7.3 A new category of exempt income is created for ship operators under certain circumstances. A key goal of the income tax exemption is to attract existing vessels and newer vessels to be registered in Australia. The income tax exemption applies to all qualifying shipping income for eligible shipping 'vessels' as defined in the Shipping Reform (Tax Incentives) Bill 2012 (SR(TI) Bill).

7.4 The SR(TI) Bill provides a mechanism for the shipping industry to obtain a certificate as an initial step in gaining access to this exemption and the other taxation concessions mentioned below. The SR(TI) Bill and the accompanying explanatory memorandum highlight the limitations to the right to privacy as that Bill enables the relevant Minister (or Department on his behalf) to seek information in relation to a company's status, where relevant documents may pertain to an individual. However, this limitation is compatible with human rights because it is reasonable and proportionate to the information sought and benefits conveyed to applicants.

Accelerated depreciation

7.5 The objective of accelerated depreciation is to encourage Australian ship owners to update their ageing fleet to more modern vessels. The effective life of an eligible vessel is capped at 10 years for companies that have been issued with a certificate under the SR(TI) Bill in respect of the vessel. The decline in value of the depreciating asset (the vessel) will therefore be calculated over a shorter period of time, providing companies with a greater deduction in the earlier income year than is currently the case.

Roll-over relief

7.6 Similar to accelerated depreciation, the objective of the roll-over relief incentive is to encourage Australian ship owners to update their ageing fleet to more modern vessels. If eligible, the balancing adjustment amount arising from the disposal of the original vessel is rolled over to the second income year after the income year in which the vessel is disposed of.

Seafarer tax offset

7.7 The seafarer tax offset is designed to stimulate opportunities for Australian seafarers to be employed on overseas voyages and to gain maritime skills. A company is eligible for a refundable tax offset (a seafarer tax offset) for salary, wages and allowances paid to Australian resident seafarers who are employed to undertake overseas voyages on qualifying vessels, if the company employs the seafarer on such voyages for at least 91 days in the income year.

Royalty withholding tax exemption

7.8 The general purpose of the royalty withholding tax exemption is to reduce the costs for Australian shipping operators of securing vessels that can be crewed by Australian workers. The exemption applies to payments made by Australian resident companies for the lease, on a bareboat basis, of qualifying vessels that are used commercially to ship cargo or passengers. Currently, the royalty withholding tax is effectively borne by the Australian shipping operator lessee because the lessor grosses up the lease payment by the royalty withholding tax amount.

Human rights implications

7.9 This Bill does not engage any of the applicable rights or freedoms.


7.10 This Bill is compatible with human rights as it does not raise any human rights issues.

Assistant Treasurer, the Hon David Bradbury

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