ATO Interpretative Decision
ATO ID 2004/314
Income Tax
Assessability of amounts paid or payable to a non-resident for the carriage of goods shipped in AustraliaFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is 5% of the amount paid or payable to a non-resident company for the carriage of goods in Australia, included in the company's taxable income under section 129 of the Income Tax Assessment Act 1936 (ITAA 1936) where it enters into a voyage charterparty with a non-resident ship owner and then subsequently enters into a voyage charterparty with an Australian resident shipper?
Decision
Yes. As the non-resident company is the charterer of the ship that has the carriage of goods in Australia (not the ship owner), 5% of the amount paid or payable is deemed to be taxable income of the non-resident company under section 129 of the ITAA 1936.
Facts
The non-resident company entered into a voyage charterparty with a non-resident ship owner and then entered into a voyage charterparty with an Australian resident shipper.
The non-resident company does not have a principal place of business in Australia.
The freight charged by the non-resident company to the Australian resident for the carriage of goods shipped in Australia is the same as the freight charged by the owner to the non-resident company.
Reasons for Decision
Section 129 of ITAA 1936 provides that 5% of an amount paid or payable for the carriage of certain items by ship is deemed to be included in the taxable income of a ship owner or charterer if the following conditions are satisfied:
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- the ship belongs to, or is chartered by, a person whose principal place of business is outside of Australia
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- the ship carries passengers, livestock, mails or goods
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- the items are shipped in Australia (that is, the goods are put on board the ship in Australia), and
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- an amount is paid or payable (whether in or out of Australia) to the ship owner or charterer in respect of such carriage.
In the situation where a non-resident shipowner is carrying items of an Australian shipper under a bill of lading or under a voyage charterparty, it is the shipowner who must include 5% of the amount for the carriage of the items in their taxable income.
However, where the ship is under a charterparty to another non-resident when items are shipped in Australia, the non-resident charterer is the person who must include 5% of the amount for the carriage of the items in their taxable income.
Accordingly, as the non-resident company is the charterer of the ship that has carriage of goods shipped in Australia, it must include 5% of the amount that is paid or payable for the carriage of those goods in their taxable income under section 129 of the ITAA 1936.
Year of income: Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1936
section 129
Related Public Rulings (including Determinations)
Taxation Ruling TR 2003/2
Taxation Determination TD 93/89
Keywords
Ship chartering
Shipping
ISSN: 1445-2782