Accelerated Depreciation and Roll–Over Relief
Accelerated depreciation means that the effective life of an eligible vessel is capped at 10 years for an Australian company that has been issued with a certificate under the Shipping Reform (Tax Incentives) Act 2012 in respect of the vessel (certified vessel). The decline in value of the depreciating asset (the certified vessel) will therefore be calculated over a shorter period of time, providing companies with a greater deduction in the earlier income years. A key goal of the statutory capped life arrangements is to support owners of older vessels to reinvest in newer vessels. Introducing a statutory capped life of 10 years provides an incentive for a younger fleet, which would have the additional benefit of incorporating new enhancements in technology and a reduced environmental impact.
A company cannot claim accelerated depreciation and Shipping Exempt Income tax incentive in relation to the same vessel in the same income year. A company also cannot apply the capped life in relation to a certified vessel if the taxpayer's associate(s) derive income in relation to that vessel that is subject to the Shipping Exempt Income tax incentive.
Specific calculations apply when a company enters into or exits from the statutory capped life arrangements.
When a certified vessel is disposed of, a balancing adjustment amount (taxable disposal gain) is not included in the company's assessable income until the second income year after the income year in which the disposal occurs. In addition, where the roll-over relief is chosen, the amount included in the company's assessable income is the balancing adjustment amount that exceeds the cost of acquiring another certified vessel. The objective of the roll-over relief incentive is to encourage Australian ship owners to update their ageing fleet to more modern vessels. The benefits of having a younger fleet include improvements in vessel safety and efficiency. Furthermore, newer vessels would incorporate enhancements in technology and reductions in environmental impacts during operation.
For more information on the specific requirements of this incentive and how it applies to your circumstances, please contact the ATO.