Taskforce proposes levies to secure merchant fleet

Levies, tax incentives and direct funding under considerations as government advances merchant fleet plan.

Cargo ships at the Port of Melbourne.

Tax incentives and assistance to ship owners and ­operators will be examined to finance Anthony ­Albanese’s pledge to ­establish a “strategic fleet” of 12 Australian-flagged merchant ships.

The government will also examine recommendations for a new levy on ship arrivals and a “training levy” on the maritime sector to fund training programs for local seafarers.

Transport Minister Catherine King on Wednesday released a taskforce report recommending financial arrangements to procure and operate the ships, that would be designed to ensure access to fuel and key imports during times of crisis.

The taskforce identified that a gap in operating costs between higher cost Australian-flagged and crewed vessels and lower cost foreign vessels was a significant driver of the decline in the number of Australian vessels.

The taskforce said intelligence provided from stakeholders indicated that the cost gap was about $5m to $8m annually depending on vessel type and crew numbers.

The proposed fleet has strong backing of unions, the domestic maritime sector and freight users, but the international shipping ­industry has warned it would be so small it would fail to deliver the supply chain surety it was intended to achieve.

The vessels would be Australian-crewed and operated on a commercial basis, but available for requisition by the Australian ­Defence Force during times of conflict or natural disaster.

The taskforce recommended the fleet include container vessels with geared ship cranes; multipurpose vessels capable of carrying project cargo and containers, roll-on roll-of vessels and liquid bulk vessels.

The government agreed in principle to the taskforce call for the cost gap between Australian and foreign vessels to be addressed through a combined measure of shipping taxation incentives “in line with international norms”, and government ­financial assistance to ship owners and operators.

Its proposed tax changes ­include reforming the seafarer tax offset and changing the shipping corporate income tax exemption to introduce deemed franking credits in respect of dividends to shareholders.

But the government only noted the proposed tax changes, saying any action would depend on a ­detailed Treasury assessment.

It also noted the proposed levy on vessel arrivals, which the taskforce said could be calculated on a net tonnage basis for each ship.

Noting the recommended training levy, the government ­acknowledged the financial burden of providing mandatory sea time to trainee and cadet seafarers to obtain qualifications fell mainly on a small number of operators and would consider the practicalities of establishing a “beneficiary” pays approach.

Ms King told The Australian a pilot of the program would begin next year with four Australian-flagged vessels, with the government aiming to build up to 12 over time. She said the government was yet to decide on whether it would adopt new levies on the sector.

“I’m very conscious of the impacts of levies,” Ms King said.

“We agree in principle with a broad view that there is a cost differential we need to fill. Part of the work we’ve now got to do is how do we go about doing that.”

Maritime Union of Australia national secretary Paddy Crumlin welcomed the recommendations, saying the fleet would be an important national security component. Maritime Industry Australia Limited, which represents domestic shipping companies, said the taskforce recommendations could “level the playing field for Australian shipping businesses”.