The Federal Labor Government’s landmark shipping reforms came into effect on the 1st July 2012.

The tax reforms, including the establishment of the Australian International Shipping Register (AISR) are designed to promote investment in Australia’s involvement in international shipping. 99.9 per cent of Australia’s cargo trade is moved by ships, making it the 4th largest shipping task in the world and yet, Australia has only 4 international trading vessels.

The Government’s view is that a competitive and growing domestic shipping industry is in Australia’s long term national interest.

Companies which place vessels on the AISR will receive the government’s zero tax rate, the seafarer tax exemption (where companies do not have to pay employee income tax) and other fiscal incentives in the government’s shipping reform package, including:

  • provision for accelerated depreciation of vessels via a cap of 10 years to the effective life of those vessels;
  • rollover relief from income tax on the sale of a vessel; and
  • an exemption from royalty withholding tax for payments made for the lease of a shipping vessel.

In addition to reducing the cost of owning and operating an Australian ship, under the government’s shipping reforms AISR vessels on international voyages will pay international wages and conditions as set by the International Transport Federation. AISR vessels will be able to hire foreign seafarers; though the master and chief engineer have to be Australian.

With the Australian merchant shipping fleet having shrunk by half over the last 10 years, these tax arrangements are a major step towards ensuring that investment in Australian shipping will continue.