Superyachts and Regulatory Barriers in Australia – A Taxing Problem

The passing of legislation removing a major barrier to foreign-flagged superyachts chartering in Australian waters has been praised by the domestic industry. While this regulatory hurdle has been addressed, significant obstacles remain, particularly regarding tax compliance.

Introduction

Recent changes to the Coastal Trading (Revitalising Australian Shipping) Act 2012 (Cth) and related initiatives have the potential to enhance Australia as a superyacht charter destination further. However, these changes have not addressed a critical challenge—navigating the Australian taxation system.

Foreign-owned vessels face difficulties doing business in Australia due to an onerous tax system, geographical isolation, and a range of regulatory controls, making operations both tricky and often commercially unviable.

A Change in the Tide

On 5 December 2019, the Australian Government passed changes to the Coastal Trading Act, making it easier for foreign-flagged superyachts to charter in Australian waters. After years of lobbying by Superyacht Australia, these changes represent a first step in establishing Australia as a global charter destination.

• GST (VAT) Liability Removed: The changes remove GST liability on a yacht’s entry into Australia, though all other compliance requirements remain and charter activities are still subject to Australian GST.
• Temporary Licence: To qualify, the owner, charterer, master, or agent must apply for the licence, including details such as number of voyages, loading dates, and passenger disembarkation ports.
• Licence Duration: The licence is available for a 12-month period, with the possibility of further temporary licences.
• Sunset Clause: These provisions are only available until 30 June 2021.

Even with these legal changes, practical difficulties for foreign-flagged yacht owners regarding Australian tax compliance remain. A comparison between Australia and other popular chartering destinations shows that owners and captains will continue to face significant compliance burdens in Australia, including business and tax registrations, GST/VAT returns, and ABN registration.

Persistent Challenges

While the Coastal Trading Act changes remove GST on importation, most irritants for yacht owners persist: complex registration systems, monthly GST filings, fringe-benefits tax, excise, pay-as-you-go crew taxes, and corporate income tax. A potential trap exists for owners who assume changes have made Australia “easy”—in reality, significant complexity remains.

Fortunately, solutions under current Australian tax laws allow regulatory burdens to be managed efficiently. Appointing a suitably authorised local fiscal agent can help owners avoid direct dealings with revenue authorities and ease compliance.

As with any new business venture, thorough preparation is critical to avoid surprises. Optimal outcomes regarding tax are rarely reached retrospectively; this principle applies to superyacht chartering in Australia.

Australian Tax Complexity Compared

What is interesting to note is how the Australian system does compare to other popular chartering destinations both in Europe and the Pacific. When compared, it illustrates the problem the local industry has faced in attracting foreign-flagged superyachts to Australia for commercial chartering.

The table following provides a summary of some of the registrations, licenses and taxes that may apply in each jurisdiction for foreign-flagged superyachts visiting for chartering purposes. As the table demonstrates, some elements of the Australian tax regime are far more restrictive than those found in many popular European destinations.

Another compounding factor is that other jurisdictions in the South Pacific have made concessions available for superyacht chartering in order to attract more vessels. In particular, Fiji, Tahiti and New Zealand have removed obstacles around importation and registration that are far more relaxed than those found in Australia. Again, the table compares the different approaches to superyacht charter.

A Complete Solution and Unique Opportunity

Despite the challenges outlined above, there are solutions under existing Australian tax laws that allow for all of the regulatory burdens and complexities of the Australian tax system to be easily managed. Commonly, these solutions involve the appointment of a suitably authorised local fiscal agent to deal with the Australian authorities on behalf of the yacht owner.

What should be of note is that the role of these representatives differs from that of a charter broker or a land agent as they are technically responsible for tax lodgements of another entity – usually something that requires a different set of skills, experience and above all, specific qualifications.

To repeat, what the solutions do provide is a huge opportunity for foreign-flagged vessels to charter in Australia without the headache of requiring several registrations and meeting other compliance and regulatory burdens that may otherwise deter potential interest from the region. Further, these solutions may also remove the need for yacht owners to deal directly with Australian revenue authorities or navigate the system on their own.

As global interest in Australia grows—with events like the 2020 Summer Olympics (Tokyo), 2021 America’s Cup (Auckland), Australian Open (Melbourne), Formula 1 Australian Grand Prix (Melbourne), and New Year’s Eve (Sydney)—Australia is uniquely positioned as a superyacht chartering hotspot for the new decade.

Other South Pacific jurisdictions like Fiji, Tahiti, and New Zealand have made concessions to attract more vessels by relaxing importation and registration obstacles.

This article appeared in Ocean Magazine, Issue 89 – January/February 2000.