Stronger Shipping for a Stronger Economy is the most significant reform in our maritime history.
As an island nation, the maritime sector is the cornerstone of Australia’s transport industry. Safe, efficient, environmentally sustainable maritime operations are critical to improving our national productivity and maintaining our enviable reputation in regard to environmental management, marine safety and security.
Movement of cargo on the ‘blue highway’ provides an environmentally sustainable transport choice and eases congestion on the road system. Around 25 per cent of the domestic freight task (on a tonne kilometre basis) is carried by ships. Over the last 15 years, the amount of this cargo carried by foreign vessels, employing foreign crews has increased from 6 per cent to 30 per cent.
More than 99 per cent of Australia s international trade is carried by ships, yet only 0.5 per cent of our export trade is carried on Australian flagged vessels.
This is a lost economic opportunity.
Lack of action has disadvantaged the Australian shipping industry and led to the current state of decline. This decline can be measured by:
¯ decreased ship numbers – since 1996, the number of Australian registered trading vessels have more than halved from 55 to 22;
¯ crew numbers – employment on Australian registered trading vessels has reduced from 2,400 to 1,300 over the same period;
¯ average age of fleet – the average age of Australian vessels is 19 years, compared to a global average of 12 years. Newer ships are safer and more efficient.
Australia’s competitor nations have responded decisively to implement fiscal and regulatory arrangements to foster the growth of their shipping industries. In the most global of industries, the Australian Government’s policy settings must provide an internationally competitive investment environment.
Stronger Shipping for a Stronger Economy delivers a reform package that positions the Australian shipping industry to take advantage of the opportunities provided by our burgeoning export market and increased domestic transport task.
The shipping package comprises four key elements:
¯ tax reforms to remove barriers to investment in Australian shipping and to foster the global competitiveness of the shipping industry;
¯ a strengthened and simplified regulatory framework with a transparent licensing regime supported by clearly stated objectives;
¯ the establishment of an Australian International Shipping Register (AISR) to encourage Australian companies to participate in the international trades; and
¯ establishment of a Maritime Workforce Development Forum to progress key maritime skills and training priorities.
Tax Reforms
The centrepiece of the tax package is the introduction of a tax exemption regime for Australian ship operators, which delivers an effective tax rate of zero on the qualifying elements of corporate income tax. This will ensure that they are competitive with foreign owned and subsidised shipping.
The tax exemption will offer an inclusive approach to defining those activities that qualify for the tax exemption, ensuring our tax regime is competitive with the UK, Singapore and other jurisdictions. To get the benefit of this tax exemption, Australian shipping companies will have to make a 10 year ‘lock in’ commitment to being Australian registered ships and meeting Australian maritime safety conditions.
Access to the tax exemption is also contingent on meeting a minimum training requirement; ensuring that industry plays its part in securing a stable maritime skills base.
Other components of the tax regime for Australian shipping include:
¯ a tax scheme combining a reduction in the depreciation period from 20 to 10 years, a balancing charge deferral, and relaxed capital gains tax (CGT) provisions if CGT applies, commonly called roll-over relief;
¯ exemption from Royalty Withholding Tax liability for foreign owners of vessels where the vessel is leased under a bareboat charter to an Australian company; and
¯ ensuring Australians can work in international seafaring by providing a seafarers’ tax concession for resident employers of Australian resident seafarers, who spent 91 days or more on international voyages on qualifying vessels in an income year.
Consistent with the Australian Government’s objectives to increase the size of the national fleet, registration on the Australian primary or international shipping register will be a pre-requisite for access to these tax incentives.
Licensing Regime
It is important that Australian coastal shipping is competitive and that shippers can access foreign registered vessels where Australian registered ships cannot service their trades. The new licensing regime will support Australian shipping while establishing clear boundaries around the necessary role of foreign vessels in our coastal trade. Licensing requirements and conditions will be clearly established in legislation to provide certainty and clarity to all industry operators.
The new framework will comprise a three tier licensing regime:
¯ a General Licence will provide Australian flagged vessels with unrestricted access to the coastal trades for a period of up to five years at a time. Most of these vessels will also be eligible for the tax incentives;
¯ a Temporary Licence will enable foreign flagged vessels to operate in the coastal trades, subject to time, trade and/or voyage conditions. These licences will be available for a period of up to 12 months;
¯ an Emergency Licence limited to cargo or passenger movements in emergency situations only such as a natural disaster or other critical emergency.
Supporting this regime, will be new reporting and publishing arrangements, which will improve transparency in the operation of the regulatory processes. For the first time, Australian registered vessels and all industry operators will have the information necessary to inform their business decisions.
Existing foreign-registered vessels will have five years to transition to Australian registration.
Australian International Shipping Register
Establishing an Australian International Shipping Register (AISR) will provide a competitive alternative for Australian ship owners and operators to registering overseas.
Key features of the AISR include:
¯ access to the tax exemption and other tax incentives;
¯ mixed crewing arrangements enabling employment of foreign seafarers at internationally competitive rates and conditions, consistent with the Maritime Labour Convention and other international labour treaties;
¯ requirement for a minimum of two Australian seafarers, preferably in the positions of Master and Chief Engineer;
¯ workers compensation arrangements consistent with Maritime Labour Convention requirements; and
¯ application of the same maritime safety, environmental and occupational health and safety standards as apply to primary Australian register vessels.
The AISR will address the cost disadvantages currently experienced by Australian companies operating in the global shipping market, while maintaining high safety and environmental standards.
Maritime Workforce Development Forum
The maritime industry is confronting a dual challenge; an ageing workforce and an increase in shipping volumes, requiring more seafarers, safety professionals, harbour masters and pilots to ensure Australia s maritime safety and environmental standards are maintained. Securing a long term skills base is essential to a viable Australian shipping industry.
The Maritime Workforce Development Forum, comprising experienced representatives from across the maritime and skills industries and unions will work with the Australian Government to improve skills outcomes. In undertaking its work, the Forum will work closely with the proposed National Workforce and Productivity Agency.
speech by Minister 9 September 2011.
