The Tax Laws Amendment (2012 Measures No. 6) Act 2013 (Cth) and the Tax Laws Amendment (2013 measures No. 2) Act 2013 (Cth) amend the Income Tax Assessment Acts. The amendments clarify that payments and benefits arising from native title agreements are exempt from taxation, ending long standing uncertainty surrounding their assessability.
Key features of the amendments:
An income tax exemption for ‘native title benefits’ which include payments and benefits made to an indigenous person or an ‘indigenous holding entity’ under an agreement relating to native title or as a compensation payment required under the Native Title Act 1993 (Cth).
A capital gains tax exemption for capital gains and losses made by an indigenous person or indigenous holding entity where the gain or loss results from the transfer, cancelation, surrender or creation of a trust over native title rights.
Payments and benefits will be exempt from taxation if paid to an ‘indigenous holding entity’ which is defined to include:
Prescribed Bodies Corporate and Registered Native Title Bodies Corporate, Indigenous land councils, corporations registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) and trusts with indigenous beneficiaries.
The Tax Laws Amendment (2013 measures No. 2) Act 2013 (Cth) has also amended this definition to ensure that it extends to charitable trusts.
The new exemption does not extend to remuneration, payments for goods or services or administrative costs. Nor will it apply to exempt investments or income generated from payments made under an agreement relating to native title.
The amendments are retrospective and apply to native title benefits provided on or after the 1 July, 2008.
Relevant provisions:
Tax Laws Amendment (2012 Measures No. 6) Act 2013 - Schedule 1
Tax treatment of native title benefits
Part 1 -- Main amendments
Income Tax Assessment Act 1936
s 1 Subsection 128U(1) (definition of mining payment )
Omit all the words after "but does not", substitute:
include:
(d) a payment made by a distributing body; or
(e) a native title benefit (within the meaning of the Income Tax Assessment Act 1997 ).
Income Tax Assessment Act 1997
s 2 Section 11-55 (after table item headed "National Rental Affordability Scheme")
Insert:
native title benefits
native title benefits
59-50
3 After section 59-45
Insert:
59-50 Native title benefits
(1) To the extent that a * native title benefit would otherwise be included in your assessable income, it is not assessable income and is not * exempt income if you are an *Indigenous person or an * Indigenous holding entity.
(2) To the extent that an amount, or other benefit, arising directly or indirectly from a * native title benefit would otherwise be included in your assessable income, it is not assessable income and is not * exempt income if you are an * Indigenous person or an * Indigenous holding entity.
(3) Neither subsection (1) nor (2) applies to an amount, or benefit, to the extent that it:
(a) is for the purposes of meeting the provider's administrative costs; or
(b) is remuneration or consideration for the provision of goods or services.
(4) Subsection (2) does not apply to an amount, or benefit, to the extent that it arises directly or indirectly:
(a) from so much of:
(i) the * native title benefit; or
(ii) an amount, or benefit, arising directly or indirectly from the native title benefit;
as is not * non-assessable non-exempt income of an entity because of this section; or
(b) from an entity investing any or all of:
(i) the native title benefit; or
(ii) an amount, or benefit, arising directly or indirectly from the native title benefit.
(5) A native title benefit is an amount, or * non-cash benefit, that:
(a) arises under:
(i) an agreement made under an Act of the Commonwealth, a State or a Territory, or under an instrument made under such an Act; or
(ii) an ancillary agreement to such an agreement;
to the extent that the amount or benefit relates to an act that would extinguish * native title or that would otherwise be wholly or partly inconsistent with the continued existence, enjoyment or exercise of native title; or
(b) is compensation determined in accordance with Division 5 of Part 2 of the Native Title Act 1993 .
Note 1: Agreements that can be covered by paragraph (a) include:
(a) indigenous land use agreements (within the meaning of the Native Title Act 1993 ); and
(b) an agreement of the kind mentioned in paragraph 31(1)(b) of that Act; and
(c) recognition and settlement agreements (within the meaning of the Traditional Owner Settlement Act 2010 (Vic.)).
Note 2: Paragraph (a) does not require a determination of native title under the Native Title Act 1993 .
(6) An Indigenous holding entity is:
(a) a * distributing body; or
(b) a trust, if the beneficiaries of the trust can only be * Indigenous persons or distributing bodies.
s 4 After section 118-75
Insert:
118-77 Native title and rights to native title benefits
(1) A * capital gain or * capital loss you make is disregarded if:
(a) you are an * Indigenous person or an * Indigenous holding entity; and
(b) you make the gain or loss because one of the following things happens in relation to a * CGT asset mentioned in subsection (2):
(i) you transfer the CGT asset to one or more entities that are either Indigenous persons or Indigenous holding entities;
(ii) you create a trust, that is an Indigenous holding entity, over the CGT asset;
(iii) your ownership of the CGT asset ends, resulting in * CGT event C2 happening in relation to the CGT asset.
(2) The * CGT assets are as follows:
(a) * native title;
(b) the right to be provided with a * native title benefit.
Note: Paragraph (a) does not require a determination of native title under the Native Title Act 1993.
s 5 Subsection 995-1(1)
Insert:
"Indigenous holding entity" has the meaning given by subsection 59-50(6).
s 6 Subsection 995-1(1)
Insert:
"Indigenous person" means an individual who is:
(a) a member of the Aboriginal race of Australia; or
(b) a descendant of an Indigenous inhabitant of the Torres Strait Islands.
s 7 Subsection 995-1(1)
Insert:
"native title" has the same meaning as in the Native Title Act 1993 .
s 8 Subsection 995-1(1)
Insert:
"native title benefit" has the meaning given by subsection 59-50(5).
s 9 Application of amendments
(1) The amendments made by items 1, 2 and 3 apply in relation to income years starting on or after 1 July 2008.
(2) The amendment made by item 4 applies in relation to CGT events happening on or after 1 July 2008.