At the end of 2014 Christmas for most of us was a busy time of year, running out of time to complete the last minute end of year jobs, being rushed to purchase gifts and those festive foods is all pretty normal. But for my client the pressure was really on to have his beautiful Superyacht successfully launched and sailing off the aft deck of the transport ship and before the port services closed. With the captain, his wife, crew, owner and his family and friends all flying in from Europe and America the expectations were high and defeat was not an option. Potentially, customs may have refused the control certificate and in the eleventh hour the unthinkable did happen marooning this beauty and her 13 metre tender high and dry on a ship at an industrial port. However, some quick thinking and advocacy work resolved the impasse and this story had a fairy tale ending.
My firm has a policy that new matters coming into the office after 1 November will not be commenced until the New Year, unless there is an emergency. It was not until 21 December that our office received an email from the captain marked “URGENT”. The email requested our services to act as central point of communication liaising with the logistics carrier, captain, manager and the owner’s lawyer who was based on the East Coast of America. With instructions to review all documents, assist where possible and ensure our client was not legally exposed to customs duties, potential taxes or other laws.
Our office attempted to talk the American lawyer but given this was occurring over the last weekend before Christmas a game of phone tag ended up frustrating this process, so we reverted to email. Once an open line of communication between all the relevant players was established and we had received full instructions we contacted the logistics provider to establish what immediate help was required. We understood that the vessel was being shipped into Australia from Europe, to be used for personal use for a couple of weeks. At the end of this cruising period the vessel would either be shipped or make its own passage out of Australian waters.
The main issue arising was that the political/legal seascape had changed. While in the past customs was usually satisfied with an undertaking and passport from the owner or captain that after cruising the vessel would leave Australian waters, this level of evidence alone was not being accepted. And further evidence had to be produced to avoid having to pay surety that was a six-figure value. Significantly, my client’s anonymity was paramount and the use of passports or any other document was to be sensitively considered.
The Law
Generally, in the above circumstances a vessel shipped in would be no different to any other commodity and subject to customs duty and GST if the vessel were then going to be for domestic consumption however, there is an exception.
Pursuant to A New Tax System (Goods and services Tax) Act 1999 (Cth) s 13.5. A Yacht is not a non‐taxable important (sch ‐4 of Customs Tariff Act 1999 (Ch)). So normally the Yacht would be subject to GST. However, s 171.5(1) holds that the 162‐exception for duty applies and no GST would need to be paid.
However, duty is payable per Customs Act 1901 (Cth) s 132AA(1) when:
- Goods entered for home consumption
- Goods prescribed by the regulations and entered for home consumption
- Goods about which the owner, or a person acting on behalf of the owner, is required by section 71 to provide information
- Goods of a kind referred to in paragraph 68(1)(e) that are not covered by item 3
And duty would be payable when the information about the goods is provided, or when the goods arrive in Australia, whichever is later. Thus usually, the vessel would fall under Item 1 of the above table and be subject to duty. However, there is an exception. ss 162, 162A that allows for temporary importation of goods.
S 162 (1) holds that goods of a prescribed person for prescribed purpose and that intends to be exported can be delivered into Australia for payment of a security (or undertaking to the satisfaction of a collector) to the amount of the duty and GST the would be payable.
Sub‐s (3) holds that if you paid a security and export the goods within 12 months (and all other regulations complied with) then you get the security paid back. S 162A(1) holds that the regulations may prescribe when a temporary importation exception applies.
The Customs Regulations 1926 r 124(1) holds that:
Tourists and temporary residents are prescribed classes of persons and Goods imported for entertainment are for a prescribed purpose. So what does this all mean?
Applying the Law
Scenario 1: Yacht is passing through Australia as Cargo ‐ No tax. The good is not being imported for the purpose of home consumption so neither GST nor Duty should apply.
Scenario 2: Someone wants to sail the ship for a few weeks over the holidays ‐ Usually have to pay GST and Duty. However, if the master is a temporary resident or tourists, there is an exception.
- They can pay a security to the value of the GST and Duty and get the money back when exported. OR
- They could also give an undertaking. So they could put the money in our trust account.
However, these exceptions do not apply if the owner is a permanent resident (citizen) and they will have to pay tax.
In these circumstances the vessel was being shipped into the country as cargo and the purpose of the shipment was for private use, cruising the east coast. Further, this would be for a temporary period as the vessel would depart Australian territorial waters under its own steam.
Assisting our client position was the fact that he was not an Australian citizen and therefore a certified copy of the passport would assist greatly in getting the certificate. Further, it was hoped that a strict interpretation of the law would be relaxed, given the practical difficulties with surety and that a certificate would be issued by customs accepting an undertaking and the passport.
Customs adopted a stricter interpretation of the act and while our client was able to pay the surety the practical reality was that it would not be in the trust account until after Christmas nor would a bank guarantee be ready at such short notice the day before Christmas, so the vessel would not be released and this would be devastating.
A Practical Solution
While, the logistics carrier had applied for a control certificate and under the certificate it was possible for either:
- a bank guarantee to be given as security Or
- possibly a written guarantee given supported by the security of a passport.
However, customs were wanting more than the passport they were requiring evidence that would support the vessel’s transit out of Australian waters once launched and financial documents supporting the ability to pay surety as well as documents showing the temporary nature of the stay.
It was a nail biting couple of days for all due to the change in customs stricter interpretation of the law, the down side was that this left the logistics carrier in a potentially embarrassing position, given that his service was trusted and established and that he personally had been doing his job for over 15 years and had not been confronted with this problem in the past.
All the documents were supplied and customs eventually issued the control certificate in the 12th hour, just in time to have the vessel launched before the port closed down for Christmas, saving the logistics carrier much embarrassment.