Native Title Tax Reforms: Bull's Eye or Wide of the Mark?
| DOI | 10.22145/flr.41.3.5 |
| Date | 01 September 2013 |
| Published date | 01 September 2013 |
| Subject Matter | Article |
NATIVE TITLE TAX REFORMS: BULL'S EYE OR WIDE OF
THE MARK?
Ian Murray
ABSTRACT
Twenty years on from Mabo v Queensland (No 2) (1992) 175 CLR 1, there is change afoot
in the tax treatment of native title. On 25 June 2013, the federal Parliament passed
reforms which render certain payments to, or for the benefit of, Indigenous p ersons
exempt from income tax. To qualify, the payment s must be made under native title
agreements for acts affecting native title, or by way of compensation under the Native
Title Act 1 993 (Cth). While drafted in simple language, the reforms apply against a
complex factual backdrop of native title agreements, trust structures and social policy
issues.
This paper argues that the reforms are likely to cause significant implementation
difficulties for energy and resources proponents and Indigenous groups. They also
raise potentia l hurdles for the government' s objectives of reducing uncertainty in the
tax treatment of native title rights and of improving economic and social outcomes for
native title groups. The significance of these problems is highlighted by the scale of
benefits under native title agreements over land access. The paper therefore questions
whether an earlier option raised by the government, an Indigenous Community Fund
model, deserves further consideration. It would more directly link tax exemption to
outcomes, would improve the certainty of tax treatment and would also better support
the intermediary Indigenous benefits management instituti ons which will play a
critical role in achieving those outcomes.
INTRODUCTION
Twenty years on from Mabo v Queensland (No 2),
1
there is change afoot in the tax
treatment of native title payments. On 25 June 2013, the federal Parliament passed the
_____________________________________________________________________________________
Assistant Professor and member of the Centre for Mining, Energy and Natural Resources
Law, Faculty of Law, University of Western Australia and Consultant, Ashurst Australia.
The author would like to express his g ratitude to Jean Bursle, Jared Clements, Geoff
Gishubl, Len Hertzman and Marcus Ryan for their comments in contemplation of, or on, an
earlier version of this work. The views expressed in this paper, along with any errors, are
the author's own and do not repres ent those of the University of Western Australia or
Ashurst Australia. This article was accepted for publication on 10 June 2013.
1
(1992) 175 CLR 1.
498 Federal Law Review Volume 41
____________________________________________________________________________________
Tax Laws Amendment (2012 Measures No 6) Act 2013 (Cth) ('NT Tax Act') which renders
certain payments to, or for the benefit of, Indigenous persons exempt from income
tax.
2
To qualify, the payments must be made under native title agreements for acts
affecting native title, or by way of compensation under the Native Title Act 1993 (Cth)
('NT Act'). While drafted in simple language, the reforms apply against a co mplex
factual ba ckdrop of native title agreements, trust structures and social policy issues.
3
The agreements include land access agreements which seek to secure land access and a
long term social licence to operate for many key Australian resources projects.
4
This paper argues that, while an improvement on an earlier Exposure Draft Bill,
5
the reforms are likely to cause significant implementation difficulties for energy and
resources proponents and Indigenous groups. They also raise potential hurdles for the
government's objectives of reducing uncertainty in the tax treatment of native title
rights and of improving economic and social outcomes for native title groups. The
significance of these problems is highlighted by the scale of benefits under land access
agreements, likely to be in the hundreds of millions of dollars per year in Western
Australia alone.
6
Moreover, the difficulties are exacerbated by the likelihood that the
majority of native title agreements for the current commodities cycle are already in
place.
The paper therefore questions whether an earlier option raised by the government
deserves further consideration. That option is an Indigenous Community Fund
('Fund') model.
7
It would more directly link tax exemption to outcomes and improve
the certainty of tax treatment for payments received by the Fund. The Fund model
would also better sup port the inter mediary Indigenous benefits management
institutions which will play a critical role in achieving those outcomes.
The content of the reforms is outlined in Part 1. In addition, this Part also sets out
the relevant c ontext, by identifying the reasons for the introduction of the reforms,
along with their capacity to effect change given the phase of commodities investment
in Australia. It asks, in particular, whether the majority of land access agreemen ts for
the current commodities cycle might already have been entered into.
Part 2 explores the consequences of the reforms for energy a nd resources
proponents and Indigenous groups. Part 2.1 suggests that certainty may actually be
reduced for all parties, as apportionment between tax exempt payments and payment s
subject to the normal ta x rules is likely to be required under existing and future land
access agreements. Allocating payments between acts affecting native title and
payments made for other purposes is likely to be a difficult task, which may be
rendered even harder in some cases by uncertainty about whether native title exists.
Further, the reforms provide an incentive to reneg otiate existing agreements to address
the apportionment issue.
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2
NT Tax Act sch 1.
3
See, eg, The Treasury (Cth), 'Native Title, Indigenous Economic Development and Tax'
(Consultation Paper, October 2010) 2, 5 ('2010 Consultation Paper').
4
For further detail on land access agreements, see below Parts 1.2.2 and 2.1.1.
5
Exposure Draft Tax Laws Amendment (Tax Treatment of Native Title Benefits) Bill 2012
(Cth) ('Exposure Draft Bill').
6
See below Part 1.2.2.
7
See below Part 3.
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