Shipping exempt income tax incentive

A key goal of the Shipping Exempt Income tax incentive is to attract existing vessels and newer vessels to be registered in Australia. Under this incentive, certain income generated from shipping activities of eligible vessels may be exempt from income tax under section 51-100 of the Income Tax Assessment Act 1997 if certain criteria are satisfied.

A vessel is an eligible vessel if the company has applied for and obtained a current Shipping Exempt Income certificate in respect of the vessel under the Shipping Reform (Tax Incentives) Act 2012 (see below).

Income that may be exempt from income tax under the Shipping Exempt Income tax incentive must be income derived from the following activities that take place on a day to which the Shipping Exempt Income certificate applies:

  1. Core shipping activities. These are activities which are directly involved in the operation of an eligible vessel to carry shipping cargo or shipping passengers. Core shipping activities undertaken by a company in respect of an eligible vessel that it operates may include:
    • Carrying the shipping cargo or shipping passengers on the vessel;
    • Crewing the vessel;
    • Carrying goods on board for the operation of the vessel (including for the enjoyment of shipping passengers);
    • Providing the containers that carry shipping cargo on the vessel; and
    • Loading shipping cargo onto, and unloading it from, the vessel.
  2. Incidental shipping activities. These are activities incidental to core shipping activities.

The income from incidental shipping activities may come within the Shipping Exempt Income tax incentive only if the total incidental shipping income does not exceed 0.25% of the total core shipping income in any one income year (Section 51-100 of the Income Tax Assessment Act 1997 refers).

To obtain a Shipping Exempt Income Tax incentive in respect of eligible income relating to an eligible vessel, an Australian company must have a Shipping Exempt Income certificate with respect to that vessel. To obtain such a certificate, the company must meet certain management and training requirements.

For more information on the specific requirements of this incentive and how it applies to your circumstances, please contact the ATO.