Parliament has recently passed Tax Laws Amendment (2012 Measures No. 6) Act 2013 (Amendment Act) to clarify the income tax treatment of native title benefits. The Amendment Act received Royal Assent on 28 June 2013.
The reforms set out in the Amendment Act were first announced on 6 June 2012, by then Attorney-General, at the Australian Institute of Aboriginal and Torres Strait Islander Studies Native Title Conference. The announcement detailed that amendments would be made to tax law to ensure that certain payments and benefits arising from native title agreements are not subject to income tax, including capital gains tax. The Bill was then introduced into parliament on 29 November 2012.
The reforms are set out in Schedule 1 of the Amendment Act which amends the Income Tax Assessment Act 1936 and the Income Tax Assessment Act1997 to clarify that certain payments made to or for the benefit of Indigenous persons under native title agreements, or by way of compensation under the Native Title Act 1993 (Cth) (NTA) will not be subject to income tax, including capital gains tax (CGT).
In a joint press statement then Attorney-General Nicola Roxon said the Amendment Bill will help improve native title agreement-making and ensure Indigenous Australians are able to unlock the economic potential of their native title. Assistant Treasurer, David Bradbury, said the changes complement the Government’s broader not-for-profit reform agenda, which will reduce red tape and enhance trust and confidence in the not-for- profit sector, and also resolve a long standing uncertainty about the way native title benefits interact with the income tax system.
The amendments will apply retrospectively from 1 July 2008.
It will be important for proponents operating in this space to consider the impact the Act will have on land access agreements after 1 July 2008. In particular, careful consideration will need to be given to the form of native title agreements being negotiated, appropriate benefit management structures and, ultimately, the effective implementation of such agreements.