Native Title Tax Reforms: Bull's Eye or Wide of the Mark?

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 persons exempt from income tax. 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). 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 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 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 institutions which will play a critical role in achieving those outcomes.