Tax: the final frontier

Rachel Kuttner, Srn. Consultant Corporate Tax
Cliff Parker, Associate Director, Space Advisory

It is an important step towards Australia playing a more active role in the global space market which is valued at approximately A$450 billion per annum globally and around $3-4 billion in Australia.

This has renewed interest and focus on how Australian entities will develop and benefit from the growth of the space industry and the tax implications for these entities.

There are currently strategic investments into satellite-based positional, navigation and timing capabilities which may encourage support and investment. This investment provides a wealth of opportunities for new and existing Australian and international businesses.

Sectors likely to be impacted by the space industry include agriculture, mining, communications, financial services (insurance, superannuation funds and investment funds), not for profits and government.

There are many tax matters interested parties will need to consider when investing into the space industry. Some include:

  • registering new entities with Federal and States tax authorities
  • consideration of the appropriate structure for repatriation of profits
  • eligibility for research and development concessions
  • treatment of carried forward losses for tax purposes
  • withholding tax obligations, specifically for international payments
  • tax deductibility of certain start-up costs
  • the consideration of the small business tax concessions
  • eligible depreciation deductions – for example depreciation of satellites
  • eligibility for government grants

Taxation laws specifically relating to the space industry and exploration activities are currently at a preliminary stage. However, with the State of California revenue authority considering to tax the launch of rockets based on distance travelled over California airspace, a future precedent for new taxes to be raised may have been set. At present, it appears that a launch site may be constructed in Arnhem Land, Northern Territory.

With an industry growing globally at approximately 9.7 percent per annum, now is the perfect time for our nation to reach for the stars.

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