Smart Charter Yacht Ownership Tax Considerations

Charter yacht ownership is the most cost efficient way own your own boat and enjoy the freedom and enviable lifestyle this brings you.

On this page we talk about the tax implications of owning a charter yacht.

As a potential yacht charter owner you essentially have a choice between 2 models:

1. A Charter Boat Business which in all respects meets the tests of a profitable Charter Boat Business as described in the Charter Boat Tax Ruling TR 2003/04 released in May 2003. A significant factor in this ruling is the need for the business to indicate prospect of profit and significant commercial purpose as shown in the examples within the ruling. This model, set up and operated correctly, potentially allows full negative gearing (FNG) in a similar manner to an investment property where surplus losses from one business may be offset against other assessable income.


2. A Charter Boat Enterprise which may not meet all of the tests of a complete Charter Boat business as described in the Charter Boat Tax Ruling TR 2003/04 released in May 2003, however is still an income producing enterprise. This model potentially allows expenses from the boat to be offset against income from that boat however limited to that income only and any additional losses 'quarantined' to be offset against any future revenue from that boat (including any profit on sale). This style of business is also referred to as a Hobby Based Enterprise.

If you are considering owning a charter yacht we suggest you call us on 9997 5344 and chat to David about which model will work best for you.

SmartBoating are currently expanding their charter fleet and are seeking investors for specific boats to be placed in our Pittwater Yacht Charter fleet.

The Minister for Revenue and Assistant Treasurer, Peter Dutton, in March 2007 introduced Tax Laws Amendment (2007 Measures No. 2) Bill 2007 to improve Australia's taxation system by reducing compliance costs, improving certainty for taxpayers, supporting philanthropy and ensuring the integrity of the tax base.

Taxation of boating activities

The Bill, already in effect for the 2007-2008 income year, allows deductions to taxpayers who hold or use a boat for non-business income producing purposes (such as leasing out one's private vessel to a charter operator), in circumstances where the holding or use of the boat is not part of a specified type of boating business (such as a ferry service).

The measure will allow taxpayers to:

• Deduct expenditure relating to their boating activity up to the level of income generated from their boating activity, and
• Carry forward any excess deductions to be deducted against income from that boating activity in future years.
• Ensure that where taxpayers generate an income stream from their boat, they are not unfairly taxed, while ensuring that the tax system does not subsidise the private use of boats.

For further information go to the ATO web site and type in 'boat hire arrangements' as a key word search.

For further information about financing your charter yacht Finlease are regarded as the industry experts.

The statements contained within this website are not to be construed as formal tax advice. If you are considering charter yacht ownership your should seek qualified, independent and expert advice in this area.

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